LINEN FLAX CORPORATION OF NEW ZEALAND

Appendix to the Journals of the House of Representatives, 1949 Session I, H-44b

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1949 NEW ZEALAND

LINEN FLAX CORPORATION OF NEW ZEALAND

Presented to Both Houses of the General Assembly

Your Excellency,— Wellington, 28th July, 1949. I have the honour to submit for Your Excellency's information the 'third report of the Linen Flax Corporation of New Zealand, for the period ended 31st December, 1948. I have, &c., A. H. Nordmeyer, Minister of Industries/and Commerce. His Excellency the Governor-General of the Dominion of New Zealand.

Sir, —• Wellington, 28th July, 1949. I have the honour to submit the third annual report of the Linen Flax Corporation. This report deals with the principal operations of the Corporation for the period ended 31st December, 1948. I have, &c., F. Johnson, Chairman of Directors, Linen Flax Corporation. The Hon. A. H. Nordmeyer, Minister of Industries and Commerce.

REPORT

INTKODUCTION The influence a poor crop has on the Profit and Loss Account is shown clearly this year. The heavy rust infestation of the 1947-48 crop resulted in very light crops of low quality, and consequently most factories were working on short tonnages with resulting rises in overhead. The Methven. factory, which'was hit hardest in this regard, showed a loss of £7,885. This factory, with a capacity of 1,800 tons, processed 740 tons during 1948 ; and other factories, though less hard hit, were running at uneconomic throughputs because of lack of straw. Fibre yields were quite satisfactory, but quality was very low. Most Canterbury crops were practically devoid of any seed yield and many were retted without being deseeded. The Winton crop was good, and demonstrated the wisdom of spreading the seasonal risk geographically.

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Although continued dry weather was experienced during the growing season, heavy crops of good average quality flax have been grown in the six factory districts this year and give promise of yielding fibre of greater strength of the average than has been produced for some time. Besides the high yield of straw to the acre, there is also a high fibre content, and as growers are paid by the ton of straw on a fibre percentage basis excellent returns have been secured by them. Weather in Canterbury was good during harvest and crops went into stacks in excellent condition, except for one or two of the later sown ones which were attacked by rust. Several, especially in the Washdyke district, were damaged by hail. The Winton crop was a good one, but the weather broke during harvest and much of the straw was darkened in stook. Assisted by the Department of Scientific and Industrial Research, the Corporation is as rapidly as possible bulking up three Russian varieties which are immune to the attack of rust spores (Melampsora lini), and this year will be sowing down 70 acres of one variety and 14 acres of another, while the Agronomy Division has the third still in the plot stage. Serious capital loss during the year was suffered first at Methven late in September, 1948, and then at Makikihi in December, 1948, when the main factory buildings, together with plant and equipment, were totally destroyed by fire. Efforts are being made to have installed automatic fire-extinguishing equipment, which will minimize the likelihood of similar disasters at the remaining factories. PRODUCTION A total of 7,050 tons of crop was completely processed during 1948, and this tonnage yielded 7-9 per cent, of fibre, an increase of o*6 per cent, on the previous year. This steady increase in fibre recovery is very pleasing and is an indication of increasing efficiency in processing technique. A list of the principal products and their tonnages is shown below : Tons. Fibre .. .. .. .. .. .. 557 Rescutched tow .. .. .. .. .. 304 Buffed tow .. .. .. .. .. 202 Seed .. .. .. .. .. .. 560 Linmeal .. .. .. .. .. 437 MARKETS This Corporation was set up principally for two purposes : one, to retain the nucleus of an important strategic industry ; and the other, to supply local requirements for spinning into threads, twines, cordage, &c. Surplus production has been sold overseas at prices equivalent to or slightly below production costs. With the return to sterling parity of the New Zealand pound the overseas market became uneconomic, and consequently it is necessary to find local markets to absorb the surplus line fibre produced while making sufficient spinning tow for local requirements. The answer to this problem is the establishment of a weaving industry to supply canvas for tarpaulins, stack-covers, horse and cow covers, &c. Sales to Donaghy's Rope and Twine Co. increased from 299 tons in 1947 to 365 tons in 1948, maintaining the upward trend of their annual requirements. Besides concluding sales in the United Kingdom, the Corporation has sold tow to France and Oregon, United States of America. The demand from Oregon is a steady one for small quantities at satisfactory prices. A useful contract with John Grant and Co., in New Zealand for the supply of buffed tow for manufacture into underfelt was concluded on 31st December, 1948. Seed, other than supplies kept for resowing, was in the main sold to Dominion Industries, Ltd., for oil-production, although 300 tons were sold to Australia on a barter arrangement. Towards the end of the year a trial shipment of 30 tons of sowing seed

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was sold in Belgium at a price which was in keeping with world parity but greatly in •excess of the prices ruling in New Zealand. Endeavours are being made to explore this market. The contract for the purchase of meal expired on 31st October, 1948, and two new •contracts were let at satisfactory prices. Fortunately the new contractors are in the South Island, which will obviate the problems of storage and shipping. EMPLOYMENT The maximum number of workers employed during the year was 316, and £102,638 was paid in wages and salaries. FINANCIAL RESULTS, 1948 The Corporation's financial year coincides with the calendar year and the audited .accounts for 1948 now submitted disclose a net loss of £9,381. (A substantial portion •of this loss was the loss by fire of fibre in store at Methven.) The preponderance of poor •crop processed, the loss by fire of substantial quantity of fibre in the Methven factory, the .adverse effect of altered exchange-rates on export markets for fibre and seed, and inadequacy of crop, forcing factories below economic levels of throughput, these are the chief factors underlying the financial reverses suffered in 1948. The operating losses have been heaviest at factories working below normal capacity, .and there has been an accentuation of losses where factory fibre yields have not approximated percentages obtained at the Research Station. Work in progress has been valued consistently and conservatively at the open and •close of the financial year, but the marked shrinkage in volume of work in progress has had the desirable effect of absorbing some of the operating losses in 1948. The industry has survived a very bad year in which diseased crop, economic hazards, and fire damage have obliterated hope of financial profit. The New Year has opened with brighter prospects, and with better fortunes in 1949 the Corporation will endeavour to recoup the losses sustained in 1948. GENERAL MANAGER During the year, Mr. Hadfield tendered his resignation as General Manager. The Directors very reluctantly decided to accept it, as they realized that Mr. Hadfield was actuated by national interests in accepting his former position as Director of the Agronomy Division at Lincoln. It is fitting to place on record the valuable and outstanding service rendered by Mr. Hadfield, first as Director of Linen Flax Development as a wartime industry in 1940. Due in a large measure to Mr. Hadfield's untiring efforts and initiative, New Zealand was successful in making a very practical contribution to Great Britain of approximately 7,000 tons of linen-flax fibre, which was a critical war material. Mr. Hadfield was offered and accepted the position as Director and Deputy Chairman of the Corporation, and in this capacity the Corporation is assured of the continuation •of his experience and valued advice. In order to find a successor to Mr. Hadfield as General Manager, the position was advertised in the four main centres, forty applications being received. After careful consideration it was decided to appoint Mr. H. D. McCrostie, who had been associated with the industry since its inception in 1940, first as Manager at Oxford, and at the date of Mr. Hadfield's resignation he was the Factory Supervisor. The Directors have full ■confidence that the sound foundation laid by Mr. Hadfield will be carried on successfully by his successor. F. Johnson, Chairman of Directors. H. D. McCrostie, General Manager.

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THE LINEN FLAX CORPORATION OF NEW ZEALAND Straw Purchase Account, Year Ended 31st December, 1948 (Figures to the nearest pound) Dr - £ Or, £ Crop purchases .. . . .. , . . . ~ 46,430 Cartage in (recoveries) .. .. .. .. .. 936 Pulling .. .. .. .. .. ~ .. 3,484 Cost of Production Account (prime cost transferred) .. , . 56 107 Labour supplied to growers .. .. ~ .. 84 Expenses of fibre determination .. , . .. . . 1,370 Interest to growers .. . . . , . . .. 57 Stacking and stooking ~ .. .. . . , . 3, 772 Minimum payments on reject crops.. .. .. .. I' 846 £57,043 Cost op Production Account,. Year Ended 31st December, 1948 Dr. £ Or. £ Purchases of straw (prime cost transferred) .. 56,107 Work in progress (31st December, 1948) .. 99 547 Work in progress (Ist January, 1948) ... . .. 44,319 Stocks of tow, seed, and meal .... .. '' 10'274 Stocks of tow, seed, and meal (Ist January, 1948) . . . . 11,776 Sales of— Factory salaries .. ... .. .. .. .. 10,921 Seed.. .. .. .. . 20 039 Power and light .. .. .. .. .. .. 3,199 Tow .. .. .. .. .. '' ' 30'677 Cartage and by-products export charges .. . . ... 9,748 Meal .. .. .. . . .. . . .. 3' 343 Rents, rates, and taxes .. .. .. .. .. 871 'Rents received and sundry revenue ... .. I^sBl Compensation and workers' accident insurance .. .. 1,300 Trading Account (cost of production transferred) . 136'942 Processing .. .. .. .. .. .. 66,295 Maintenance .. .. .. .. .. .. 14,616 Fire Insurance Reserve .. .. .. ~ .. 2,638 Depreciation .. .. .. ~ .. 7,775 Factory, office, and travelling expenses .. .. .. 2,838 | £232,403 I , £232,403

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Trading Account, Year Ended 31st December, 1948 Dr. £ Or. £ Cost of Production Account .. .. .. .. 136,942 Sales of fibre .. .. .. .. .. .. 117,094 Stocks of fibre (Ist January, 1948) .. .. .. 2,636 Stocks of fibre .. .. .. .. .. .. 25,352 Export charges and fibre store insurance .. .. .. 2,927 Profit and Loss Account (gross loss transferred) . . .. 59' £142,505 £142,505 Profit and Loss Account, Year Ended 31st December, 1948 Dr. £ Or. £ Trading Account .. .. .. .. . . 59 Profit on sale motor-vehicles .. .. .. .. 372 Salaries .. .. .. .. .. .. 6,617 Profit and Loss Appropriation Account (net loss transferred) 9,381 Travelhng-expenses .. .. .. .. .. 1,161 Directors' fees and expenses .. .. ... .. 405 Audit fees .. .: .. .. .. .. 72 General expenses, telephones, and postages, stationery, Head Office rent, heat and light, exchange, discount, law-costs .. 686 Marketing expenses .. .. .. .. .. 668 Depreciation .. .. .. .. .. .. 85 £9,753 £9,753 Profit and Loss Appropriation Account, Year Ended 31st December, 1948 Dr. £ Or. £ Profit and Loss Account (net loss transferred) .. .. 9,381 Balance— Ist January, 1948 .. .. .. .. .. 4,839 31st December, 1948 " .. .. .. .. 4,542 £9,381 £9,381

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THE LINEN FLAX CORPORATION OF NEW ZEALAND— continued Balance-sheet as at 31st December, 1948 (Figures to the nearest pound) Liabilities £ Fixed Assets * £ £ Capital .. .. .. .. .. .. 190,000 Land and buildings .. .. .. .. 68,047 Reserve: Workers' accident insurance .. .. .. 2,285 Plant and motor-vehicles .. .. .. 50,754 Sundry creditors (including liability to Treasury on account assets 118, 801 being realized, £79,544) .. .. . . .. 117,788 Current Assets Bank .. .. .. .. .. .. 28,828 Sundry debtors .. , .. .. .. .. 33,542 \ Stocks of fibre, tow, meal and seed, stores, and work in progressf .. .. .. .. .. 115,390 177,760 Intangibles Research expenditure .. .. .. .. .. 7,041 Profit and Loss Appropriation Account .. .. .. 4,542 £ Fire Loss Adjustment Account .. .. .. 11,795 Less insurance reserve on buildings and contents .. 9,866 1,929 £310,073 £310,073 * Fixed assets are at valuations in accordance with the Linen Flax Corporation Act, 1945, plus additionsless annual depreciation (3 per cent, on buildings, 10 per cent, on plant 20 per cent, on motor-vehicles). f Work in progress has been valued conservatively at open and close of financial year by including straw stocks at cost plus direct wages only. 14th July, 1949. F. Johnson, Chairman of Directors. H. D. McCrostie, General Manager. I hereby certify that the statement of accounts and balance-sheet have been duly examined and compared with the relative books and documents submitted for" audit, and correctly state the position as disclosed thereby.— J. P. Rutherford, Controller and Auditor-General.

By Authority: E. E. Owen, Government Printer, Wellington.— 1949. Price 6d.]

Approximate Cost of Pape>.—Preparation, not given ; printing (789 copies), £l2 10s.

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