Burns Philp Goes Hi-Tech

A change ofpolicy for the trading giant.

THE ISLANDS trader and now industrial group Bums Philp & Co reported a 45 per cent jump in its after tax profits to SASB million for the year.

The Chief Executive of Bums Philp, Mr Andrew Turnbull, attributed the strong result to the performance of its recent acquisition, the American food giant, Fleishmann. He said the United States yeast and vinegar producer had “kicked in about SAI4 million” to help double the profit of the food arm.

The group lifted its pre-tax profit by 32 per cent to a record figure of $lOl million.

Bums Philp is in the process of shrugging off its traditional image of a south sea islands trader and is becom ing more heavily involved in high tech nology food production.

Mr Turnbull said the firm had ab solutely no regrets about its change in direction, but stressed it was not in tending to pull out of the Pacific. “There have been rumours, but we intend to keep our commitment to the region,” he said in Sydney.

Mr Turnbull described the com pany’s decision to expand in more lu crative directions as in keeping with the “hard nosed” business principles of the original founders. Bums Philp plans to continue its campaign of acquiring companies both in Australia and over seas that fit into the group’s core businesses.

The company has been hiving off its loss making or less profitable interests and concentrating on its core business, such as food production, hardware, shipping and trading and its invest ment interests. However, Mr Turnbull said Burns Philp’s shipping and trad ing as well as its Pacific division had reported improved results.

The company has divested itself of a range of businesses, including its photographic interests, its 50 per cent holding in the stevedoring company Conaust Ltd and its finance subsidiary Burns Philp Finance Ltd.

It is also in the process of selling Ira Berk Pty Ltd, its wholesale distribu tion network for Nissan motor vehi cles, which will result in a net loss to the

company, and Burns Philp Travel.

Despite losses in closing down or selling non-strategic businesses, Burns Philp netted an extraordinary profit on the sale of properties and investments, including the company’s plantations in Papua New Guinea.

The Pacific operations had experi enced a “big lift” from $A4.9m to $A7.lm, particularly through the prof itability of the Papua New Guinea op erations, where the company had successfully replicated its clean-up campaign. “We are doing what we did in Australia getting rid of the loss makers, which means a general im provement in the effectiveness and ef ficiency of business. It has come home with a bang,” Mr Turnbull said.

The company has spent a total of $A2OOm on Fleishmann’s, including the purchase price and the installation of state of the art Australian technol ogy. “The food division is coming through very strongly, and the US business is very attractive,” Mr Turn bull said.

Mr Turnbull said the company was keen to continue to make acquisitions and form joint ventures. “We are look ing at several possibilities in Australia and overseas,” he said.

Mr Turnbull said now that the core

businesses were “clean and tidy”, the group would continue to grow strongly.

He said the company would concen trate on consolidating the gains it made during the 1986/87 financial year, and said the present financial year would be profitable, but less dramatic. Equity profits, mainly from QBE Insurance, returned an improved result at $A 11.5 million.

The overall improvement in profit was partly offset by an increase in in come tax due to a rise in the corporate tax rate and the fact that the company is gradually using up its available tax losses.

Mr Turnbull said the company’s overall tax rate was significantly lower than the average corporate rate as a sig nificant proportion of the profits were earned overseas in countries that im posed a lower tax burden.

Mr Turnbull said the company ex perienced no foreign exchange expo sure, as they had naturally hedged their borrowings overseas against their in terests in each country.

He said Australian debt had been reduced through a recent rights issue and share placement, and added that their debts in the United States were at the comparatively low interest rate of eight per cent. □