Burns, Philp Islands Barometer

Annual Summary of Accounts—Outlook for Copra—Significant Warning to Maritime Unions.

TO an extent that is seen in few other parts of the world, the fortunes of the Pacific territories are affected by the condition of two or three big trading firms. Therefore, the balance-sheets of the biggest firm of all (Messrs. Burns, Phiip and Co., Ltd., which were pub lished in May) are of more than usual interest.

In spite of the vicissitudes being sup ported at present by the Islands’ chief industry (copra production), the firm’s operations and activities are being carried on profitably; which is another way of saying that the great reserve of financial strength of Burns Phiip and Co., Ltd — the result of many years of sound trading, shrewd management and financial cau tion—is not only carrying the big organi sation smoothly over the rough patch, but also is helping the Islands communi ties to bear their heavy burden. Figures like those which follow indicate that per sons with important interests in the Is lands need not fret urtduly. The bad time will pass.

It should be explained, perhaps, that Burns Phiip and Co. Ltd. trade in New Guinea, Papua and the East Indies, as well as in all Eastern Australian ports

and in New Zealand; while Burns Philp (South Seas) Ltd. operate in Solomons..

Norfolk Is., New Hebrides. Fiji, Tonga.

Eastern and Western Samoa, Niue, Nauru and Gilbert and Ellice Islands.

Burns, Philp & Co. Ltd.

The directors state in their report that further improvement was gained in the Australian section of the company’s merchandise business, sales show ing again an appreciable increase in volume. Earn ings from the shipping services were also main tained in spite of the ever-increasing foreign com petition. Trading in Papua and the Mandated Territory was seriously affected throughout the year by a steadily falling market for copra, de scending to an unprecedented low level that now renders the handling of that article unremunera tive. The directors consider that the prospects for any immediate appreciable recovery in this market are not bright.

Burns, Philp (South Sea) Co. Ltd.

The directors in their report state that on copra purchased from clients the company made an ac : tual loss. Part of the company’s earnings is from investments and ventures. Restriction of purchases by clients to essential requirements considerably lessened trading profits and shipping revenue.

As to the market for copra, the directors add, the value of the commodity is now below the cost of production, and reasonable maintenance of plan tations and trading stations. As the world’s supply would seem to have been maintained, a return to profitable prices seems largely to depend upon an improvement in the world economic condition and reduced or controlled production of substitutes for coconut oil. The outlook at present is not promis ing.

Warning To Trade Unions.

The chairman of directors, Mr. James Burns, in his annual address to share holders, on May 15, supplied an interesting and very useful summary of econo

Year ended March 31. 1932. 1933. 1934.

Net profits £ £ £ 202,407 208,531 203,257 Div., 10 p.c 150,000 150,000 150,000 To reserve Special depreciation 50,000 25,000 25,000 Copra plantation — 25,000 25,000 To staff bonus fund .. — 20,000 Carried forward .. .. 36,295 24,826 28,083 Expenses, etc .. .. 392,760 429,579 427,786 Depreciation, etc. 105,747 74,400 104,542 Gross profits

Liabilities—

700,915 712,511 735,586 Capital paid up .. .. 1,500,000 1,500,000 1,500,000 Reserve fund 875,000 925,000 950,000 Insurance reserve, etc. 485,802 496,688 516,418 Cash credits ... 63,169 40,828 36,167 Bills and foreign drafts 83 275 400 Open liabilities ..

Assets—

Merchandise, copra, 1,529,043 1,575,466 1,474,924 advances 658,583 744,950 707,867 Cash in hand Property, shipping and 129,882 143,757 123,046 shares 2,934,548 2,993,444 3,060,818 Sundry debtors .. .. 891,380 825,932 739,261

13 months, Year Year ended ended ended Jan. 31, Jan. 31, 1933.

Jan. 31, 1932. 1934.

Gross profit £ £ £ 169,182 158,121 147,699 Net profit 56.595 52,188 38,058 Dividend, p.c 5¾ 6¼ 5 Amount of dividend .. 46,875 46,875 37,500 To reserve 10,000 1,230 5,000 1,543 Carried forward 2,101

Liabilities—

Capital 750,000 750,000 750,000 Reserve Fund 85,000 95,000 100,000 Creditors 41,753 58,539 98,489

Assets—

Cash 36,200 34,976 31,663 Properties and shipping 481,008 486,612 559,397 Merchandise 212,981 238,208 195,371 Debtors 204,668 197,161 201,657

mic arid industrial conditions in the Pacific: “While our shipping services have been greatly hampered by foreign competition, we have on the whole managed to carry on fairly well during the 12 months under review,” he said.

“If it had not been for competition from foreign lines we would probably have ex panded the services. We consider that with the difficulties we have to contend with, such as the high rate of wages and overtime we have to pay our crews in comparison with foreign vessels and the onerous conditions in the Navigation Act it is wiser for us to be conservative than to buy new vessels. We have fewer ships to-day than we had 20 years ago.

“In these small Island vessels it is diffi cult to comply with the demands of not only the Navigation Act, but also the ship ping unions. We are put in the position of either tying up our ships and letting foreigners take our trade, or endeavouring to run them by conciliatory methods.

“Unless the shipping unions show a more reasonable attitude in reference to working Australian ships that are run in competition with foreigners, I doubt whether it will be very long before it will be impossible to run these vessels unless they are so heavily subsidised that the Government will hesitate to pay away so much of the taxpayers’ money to keep Australian crews employed,” Mr, Burns continued. “Owing to Papua and the Mandated Territory having been declared exempt under the Navigation Act, we can at any moment change over from Australian crews, and man our vessels with South Sea Islanders, Chinese, or Malays, similar to most shipping com panies running overseas to the East from Australia, but we do not want to do this when we can possibly carry on as we are.”

Slump In Copra.

Mr. Burns said that trade had been much brighter during the last 12 months than, during the previous year or two.

The company’s figures had not reflected this improvement, however, owing to the precarious state of the copra market. If values would go back to £12 or £14 per ton, which was a mediocre price in com parison with the average value of copra for the last 10 or 15 years, the company would do well. Islands depending on the export of copra were to-day practically insolvent, as the net value they were re ceiving for the commodity was not suffi cient to pay for the cost of production.

The foreign outlook was uncertain. Ger many and France had put restrictions on the import of copra, and the United States had placed a duty on all oils produced from copra, palm kernels, etc., as well as on whale oil. It was suggested that a special depreciation of £25,000 be allowed on the company’s copra plantations, prob ably for the next year or two. The com pany had sustained losses in copra trade on account of the persistent fall in the value of the commodity. These low prices continued, with very little likelihood of improvement. Several years ago the price of copra had been £25 to £30 per ton.

During the last month smoke-dried copra had fallen to about £6/10 per ton. At a certain period there had been no market for this quality of copra at all, and until quite recently at least half the copra pur chased by the company in the South Seas had been smoke-dried. On its plantations the company had lately been erecting hot air driers to improve the quality of the copra produced.

Mr. Burns said that the position of copra

was somewhat similar to that of rubber during the last few years. In the case of rubber, however, one could leave the trees alone, and not much harm was done, bud in copra plantations, if the labour was taken off and they were neglected, the nuts fell to the ground and started sprout ing, and tropical vegetation soon grew, so that it was not long before the property went back almost to its original state.

Therefore, it was important to carry on in the hope that the market would im urove.