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HomeMy WebLinkAboutZurich Herald, 1942-09-03, Page 6CNAD P REPORT CKERS LIMITED TO SHAREHOLDERS FOREWORD In ,this Report, at various stages, four time periods are used:--- Calenda Year gQ Fiscal Year -of the Company; 52 weeks. Ending last Thursday in Marcia Designated by year of close. e.g. Year under review is Fiscal Year 1942. ILS424.2 Y9 --or Production Year. Beginning month of flush production. e.g. Flush production of Hogs begins in Sep- tember. Therefore, the Hog Crop Year is from September to following August. Designated also by year of close. Hog Crop Year 1942 -is year from September, 1941, to August, 1942. 41, War Yeax -The war began September, 1939. First War Year -September, 1939, to August, 1940. Second War Year --September, 1940, to August, 1941. Third War Year -September, 1941, to August, 1942. Note -'War Year' istherefore co -terminous with 'Hog Crop Year.' The fifteenth year of Canada Packers Limited closed March It was the second fiscal year which lay completely within the 96th, 19.2. wee period. Throughout the year, both volume, and the nature of operations were determined almost wholly by war conditions. Volume reached a new record level, -viz. 1,228,029,942 lbs. Average per week 23.6 million lbs.. Previous high: -fiscal year 1941 1,091,263,352 lbs. increase new Bar sales reached (relatively) ft still higher vel. They were Averagee per week $2,780,000.00. evious high: -fiscal year 1941 $110,291,839.97 31.8% in, crease 31.8 % e higher percentage increase in dollar sales,- -- 11.8 stet compared with the increase in pounds sold,- • vfleets the substantial advance in prices which occurred within the year. This advance would have been greater, had it not been checks he December, 1941, by the imposition of price ceilings. The heavy increase in volume was due almost entirely to war demand (military camps at home plus shipments abroad). vilian aonsumption, especially of pork product, was curtailed in order that more might be available for Great Britain. ro Net Profit, (after Bond Interest, Depreciation $1,611,484,91 and Taxes), was Equivalent, 1.1% On Sales $144,509,000, to 13 le per 100 lbs. On Tonnage 1,228,000,000 lbs., to 00 quarterly) was The regular dividend of $4.00 per share ($1 void throughout the year. * $ * * s 12.5% $144,509,292.41 The impact pf war conditions upon the Company's operations it further indicated by the following tables abstracted from the State - dents of the last four fiscal years. The earliest of these years (ended March, 1939) was the last complete pre-war year. "5scai Year 889 1040 1941 1942 In Tonnage 800,768,692 $ 77,225,782 $1,288,786 1.6% 918,251,116 88,205,689 1,667,809 1.9% 028 1.4% 1,228 029,942 144,490,489 1,611352 110291839 ,465 1.1% other words: -in the third War Year, as compared Sales Profit Profit % of per Sales 100 lbs. 15.5c 18.2e 14,4e 13.1c to the tt pre-war year:- `onnage increased frons 800,000,000 lbs. to 1,228,000,000 lbs.53% ales increased from $77,000,000 to $144,000,000 - Sale price -per -pound of product - 22% increased from 9.8c per lb. to 11.7e per lb. Table 2 is a selection of the main data from the Balance Sheets of the same four years. AL E 22e Assets Accounts Receivable Inventories Total Current Assets Fixed Assets abilities Loans from Banks Total Current Liabilities Working Capital (Current Assets leas Current Liabilities) $ 6,680 $ 7,878 $ 7,751 $ 7,885 In this case the comparison between the last pre-war year (Fiscal 1989) and the year under review (Fiscal 1942) is a very striking one - Accounts Receivable have advanced $3,428,000 to $10,279,000 from 7,682,000 to 16,339,000 Bank Loans from Inventories from "" 3,780,000 to 14,167,000 The heavy increase in Bank Loans is the 'reflex' of the increased ateceivables plus inventories. This increase is due chiefly to sales to e Dominion Government for war consumption. As at March 26th, he DominioQ Government totalled value of meats in i$6,018,92ocess 9.32.a Te thisums s there ue mistno corresponding item in the Balance Sheet of 1939. The following analysis of the 'Sales Dollar' tells the story of the 'b siness in 'skeleton' form, and a comparison of the analysis for the lost four years reveals, from another angle, the impact of the war upon the operations of the Company. Fiaeal Year ended March 1939 1940 1941 1942 (000 omitted) $ 3,423 $ 5,340 $ '7,181 7,682 10,947 10,384 12,116 17,359 18,598 21,636 21,818 21,745 $ 8,780 $ '1,155 $ 7,027 $10,279 16,389 28,101 22,594 $14,167 5,436 9,981 10,847 20,216 TABLE Analysis of Profit & Loss -4 Years ended March 1939 Bales $77,225,732 Cost of products, chiefly Live Stock 80.5% Cost of ma- terials and. packages 2.6 Wages and salaries 8.9 General Expenses 4.4 Wartime In- ventory Reserve . -- Bepreciation 1.1 ond Interest .2 Total. cost of product, plus expen- ses• Written -off Investments Profit before taxes '.Taxes 1940 $88,205,689 1941. $110,291,889 1942 $144,509,292 Comment regarding items:- Cost tems -Cost of Products. This. is the Producer's share of the Saltie Dollar. The increase is from 80.5 per cent. in the last pre-war year to 81.4 per cent., the highest in the history of the Company. Materials. The advance in this item, --from 2.6% to 3%, 3s due chiefly to war demand for certain products (mostly tinned meats) in which container cost is high. Wages and Salaries. These declined from 8.9 per cent. to 7.8 per cent. The decline does not reflect a decrease in wage rates (which have increased somewhat), but rather the advance in price -per -pound of products. Expressed as cost per 100 lbs. of foods processed, wages and salaries in he four year's were as follows: - 1939 85 cents per 100 lbs. It 44 41 Id 1940 1941 8 1942 The increase from Fiscal 1941 to Fiscal 1942 (i.e. from 81e to 86c) is due.chiefly to the cost -of -living bonus introduced, by stages, within the year. Sundry Expenses. The decline (from 4.4 per cent. to 3.8 per cent.) is likewise due to advance in price-Per-pound ofproducts oo warsold. ld.e derive Wartime Inventory Reserve. The extra profits from increasing volume and advancing prices. It is the policy of the Government to appropriate the largest feasible share of these profits, in the form of taxes. No one questions the justice or the necessity of this policy. However, the Government recognizes that at some stage fol- lowing the war, the conditions of the war years are likely to be re- versed. Volume will decline and prices will fall. Such a recession will involve losses commensurate with extra wartime profits. But whereas, on the advance, the Government takes nearly all the profits; -the losses of the decline must be borne en- tirely by the industry. As a partial buffer against these post-war losses, a 'wartime inventory reserve' is permitted. This reserve, however, is limited in scope. It may be set up only in respect of a volume equivalent to that of the last pre-war year: (in the case ane offtthis er the full nn in mum 1939).cal Also, the reserve can be set up y tax (40%) has been paid. Depreciation. This is an 'overhead' charge. The sum is practically constant. The decline in precentage is in inverse ratio to the increase in volume. Bond Interest. Outstanding Bonds in 1939 were $3,750,000. Outstanding Bonds in 1942 were $1,500,000. Taxes Net Profits appeared Most of the material in the following table has already iu this for the fourrt. yearsethe comparison ofworth xes and profits. le to set up separately TABLE 4 Comparison Income & Excess Profits Taxes and Net Profits Taxes % of Sales e 23 Profits 8,736 % of 1.6% les Fiscal 1939 .... $ 320,200 1940 916,284 1.1% 11,667,009 1.9% 1941 1,325,000 1.2% , 1942 2,422,862 '1.7% L611,465 1.1% The 'Taxes' column reflects the advancing tax rates of the war years. The 'Net Profits' are, of course, subject to further taxation. Net profits get into the hands of Shareholders only when distributed as dividends. • When so distributed, they are subject to Personal Income Tax. The average rate of Tax would be not less than 60,. per cent. So, the final story of the Fiscal 1942 operations would$ be hat the Government receive as taxes, approximately - $ 800,000, and the Shareholders as net income In that respect, Shareholders may reasonably feel they are mak- ing a useful contribution to the war. MILLION AND HALF MORE HOGS REQUIRED But the measure of the Company's contribution to the war effort, is not chiefly in terms of taxes. The production, processing and distribution of food is one of the most vital phases of the war effort. On the North American Continent where, for ten years, the chief perplexity has arisen from a 'surplus' of food, it is now being realized that a period of shortage may be ahead. The primary problem is that of 'production.' This rests in the hands of the Farmer. Canadian Farmers, with reduced manpower, have already achieved an all-time record. In the production effort, however, the Packing Industry has a role to play, second only to that of the Farmer. The processing of the live stock, the utilization of every portion, and the prevention of spoilage, are matters of first national importance. The Industry can fairly claim to have measured up to its job. The enormously increased deliveries of live stock extve been ensions sloes havecessed- been without a single block. The necessary plant made without appeal for Government funds. And, considering the heavy labour turnover, caused by war conditions, efficiency has been well maintained. Evidence of this is found in the fact that out of the 'Sales Dollar' the percentage paid to the Producer is the highest on record. has been the indispensable Above all, the Packing Industry instrument through which the various Government controls affecting - meats have been worked out. Of these, the two most important have been:- (a) een: (a) The Canadian Bacon Board, which' controls production and shipment of :Wiltshire Baeon to Britain. • (b) The Wartime Prices and Trade Board, which has invoked the aid of the Packing Industry in establishing ceiling prices for meats. No doubt Government Boards have had similar assistance from many other industries. However, the problems in establishing ceil- ings for meat have been of the most intricate 'and difficult kind. In the framing of the regulations, the Board has called for the co -opera•• tion of large groups of senior officers from the Packing Companies, for long periods of time. This is mentioned, not because assistance was grudgingly given, but as a proof of the indispensable role of the Industry in the economy of the Dominion, and particularly in the broad Live Stock field, within which the Packing House is the mar- keting instrument. To the Live Stock Industry in its broad sense, references have already been made in this Report. They have had to do chiefly with increased production: from war demand. It is, The increased production has sprung therefore, interesting to examine it in periods of 'war years: These, -- as explained in the foreword, -correspond with crop years. Table 5 gives the record of food animals processed in inspected .establishments, in the last four crop years. TABLE 5 81 " 1/ 41 id 14 44 44 44 Slaughterings at Inspected Establishments Total Canada Crop Year Calves Sept. 1 to Aug. 31 Cattle 79.1% 80.7% 81.4% I 1939 854,953 674,963 1940 (War Year 1) 887,312 690,706 1941 ( " '" 2) 94'0,795 69.6,943 1942 ( " " 3)1 1,021,496* 717,940* Increase from crop year 1939 42,977 to crop year 1942 166,543 19'% 6% 2.8 8.8 4.8 .7 1.0 .1 8.0 8.1 4,1 8.0 7.3 , 3.8 *August estimated. The outstanding increase is in Hog production. • .3 .9 This reflects the fact that (in respect of meats) Canada's war .1 .6 job has been to keep Britain supplied with Wiltshire Bacon. .1 W Total shipments of Bacon for the same four years have been:- - Crop year 1939 .. ......... ...... 160,926,100 lbs. 1940 (list war year) .. . 291,131,600 lbs. " "" 1941 (2nd " " )* .... 443,238,000 lbs. 1942 (3rd ) 535,702,000 lbs. Sheep Swine 793,724 3,186,740 758,428 4,601,845 794,638 6,172,982 820,841* 6,506,000* 27,117 ,3,io9,260 3% 97.0 97.7 96.8 97.1 *August estimated. `�. .1 .�. Each year since the war began, the �CCanadia cGo� 1 iriinsent hes s 2.8 8.2 2.8 3,0 contracted with the British Ministry of Food a quantity of Bacon, 'leo implement these 7 13• 1.4 1.0 contracts the Canadian Bacon Board. was set upin regular weekly shipments. . Contract 1 was for 50,000 "Cwts, Weeltly.-•-price $18.02, f...s. Atlantic 1.9 1,,,4 1.I. Seaboard. 1.6 e Net Profit .... Contract 2 was for 70,000 Cwts. weekly -price 15.82 f.a.s. Atlantic Seaboard. Contract 3 was for 103,000 Cwts. weekly -price 19.77 f.a.s. Atlantis Seaboard. Or, Contract 1 and Contract 2, shipments exceeded the eontratite quantity. On Contract 3,with one month to go, it now app tihipments will fall short of the contracted quantity more than 6 million pounds. And this in spite of the fact that Canadian ncaon- sumption of pork product has been drastically cut down ke more available for export). The reason dates back to Contract 2. The reduction in prig (from 18.02 f.a.s. to 15,82 f.a.s.) was a mistake. Many Farmers, especially in Eastern Canada, felt they could not produce hogs at this price, and consequently marketed their sows. When the con. tract had run only six months (i.e. in May, 1941) the mistake was recognized and the price advanced. from Western Canada, and it Contract may belas'applied hy it did tobacon also discourage productions there. The ewer lies d i� Geography. baeont takes 6 pounds of grain to produce By converting the grain to bacon, a very important saving in freight is effected.. Because of the longer haul, this saving is 7eiativeiy greater in respect of bacon shipped from the 'West. Therefore, a price .which involve a loss to the Eastern Pig Producer may still leave a margin of profit to the Western In Western Canada, production in crop year 1942 increased Producer. 490,U6U hogs. If the price of Contract 2 had been a wise one, the Increase might have been twice that number. But whereas a Farmer can get out of production in a day,='(by liquidating his sows) ;-to get back into production requires at least . year. First, new sows of suitable type must be secured. This takes time. After the sows are bred, until the litter is marketed, a further period is involved of approximately ten months. ie revHow ealedeinothe following table ofrhogction inmarketings.ntalio and Quek>rc„ TABLE Hog Marketings in Canada Pr Crop Year Eastern Canada Western Canada Total 1,961,994 1,268,397 3,230,3:93. 194 2,458,183 2,179,175 4,637,358 1940 1941 2,920,289 3,160,592 6,080,881 884127 6,567,146 1942 (August estimated) 2,683,018 3,884,127 In the first two war years, hog marketings in Eastern Canada increase4:.np1roximately 5.00,000 hogs each year:-;°; In War Year 8, ax a result of liquidation following the announcement of Contract 2, marketings declined approximately 250,000. - * 4k* * * For the conning crop year, Britain has appealed for 700 million pounds of Wiltshire Bacon. This is 100 million pounds more than the quantity of Contract 3, and 160 million pounds more than deliveries under Contract 8. To provide the extra quantity requested by Britain in the coin - ng year will itself require an increase in production of 1,500,000 But still more hogs are asked for. Because of the developing hogs. shortages of other important foods, it would be extremely helpful, if Canadians were able to have as much pork product as they de- sired. To make this possible, at least a further 1,500,000 hogs would need to be produced. cal to the It is likely, then, that the .Government will app Cana- dian Farmers to produce, in the coming crop year, 8 million hogs more than were produced in the present crop year. In one important respect, the appeal will come at a favourable time. Hog production depends upon feed. And Canada seems about to. harvest one of the heaviest crops in its history. But hog production also takes labour. And the Farmer is already hard pressed. Moreover, he is being urged, at the same time, tib increase production in many other lines. Undoubtedly the Farmer will do his best. And more food in total will be produced. But what form the increased production will ' take, will depend upon two factors. 1. Plant considerations. Other things being equal, he will ex- tend production in branches of live stock for whieh he has existing facilities. 2. Profit. He will naturally favour that fopm of production .Which ,will yield him the highest returrate in favour of in- Botle these aeensiderations will probably op ereasing hog production. * * * * * If the production called for is realized, the increase must come chiefly from Western Canada. production has already Table 6 reveals that leadership in hog passed to that area. This fact lends weight to the importance of a much-needed effort; -namely a campaign towards hog improvement. The vast areas of the West and the varied racial origins of the producers, add greatly to the difficulties of such a campaign. Nevertheless, the issue of hog improvement is -one of the most important single factors in the outlook for Canadian Agriculture. At the end of the war, the welfare, -it might almost be said the existence, -of the Canadian Hog Industry depends upon one factor :-whether at that time Cana- dian bacon is equal in every respect to the best Wiltshire Ba -con pro- duced elsewhere. Canada is already producing on a scale which involves a surplus (over domestic requirements) of at least 4 million hogs per year. That is equivalent to 80,000 hogs per week. At the end of the war, , the surplus will likely be much greater. Unless, at that time, the British market can be held for this quantity of product, Canadian pig producers will face a crisis, which might well develop into a catastrophe. Before the war, Britain's total purchases of Bacon from abroad were es 137,000 hogs weekly. these un Can- ada's slarinis record eawa33,000ogsweekly. From Den- mark, Britain bought 65,000 hogs weekly.. After the war, Canada oust ask Britain for a market for at -Toast 80,000 hogs weekly. To grant such a request will involve a difficult modification of Britain's quota schedule. One thing is certain, Canada could not ask, and Britain could not concede such a quota, unless Canadian Bacon were equal in quality to the best bacon procurable from other countries. In wartime, all the groups concerned in hog improvement,--Pre- ducers, Government Officers, and Packers, -are so busy with the problems of filling war orders that this paramount issue of quality tends to be overlooked. But hog improvement takes time. If Canadian bacon is to be up to the necessary standar ad the has beethneowar, But the not enougb must h done during the war. A g A senior Government Officer should be assigned to this special job. Leadership must come from the Government. For final authority rests there. Willing co-operation will come from the other groups involved. 5 • * Mention has already been made of the wide extension -of Gov- ernment control made necessary by war conditions. Prices of all animal products, especially cattle, hogs, cheese, butter, powdered milk, poultry, eggs, are determined by Government action to an extent never before thought of. In the domestic field, ceiling prices have been set. As to ex- ports, not only are prices determined by Government contracts, but the actual assembly and. shipment of product has been entirely taken. over. These actions have been forced by war conditions. In the carrying out of these controls, the highly centralized Packing Industry has been a useful and co-operative instrument. Within the Industry, operations have been transformed. Under normal conditions the Packing Industry is perhaps the most keenly competitive of all Canadian industries. Competition to buy remains as keen as ever. The Government has provided for this by excluding live -stock prices from ceiling control. In the sale of meats, however, shortage of product has changed the nature of competition. It is now competition between retailers• , to secure the product which is available. In the effort to secure their requirements, retailers commonly place their full orders with two or more houses feeling, sure that even from the multiple orders, only a portion of their requirements will be shipped: Some products, for instance fresh pork cuts, have largely disappeared from the shops. One of the most acute, and disconcerting shortages has been that of beef in recent months. Space limitations permit only a bare state- ment of the causes of this shortage, They were: - 1. Owing to full employment, purchasing power was high. 2. 'Demand' was further increased by the heavy requirements of military camps. (Military requirements ha''e recently been five million pounds; monthly.) 3. A further increase in 'demand' was caused by the much -less- than -normal supply of pork meats. 4. As against these extra 'demand' conditions, 'supply', during the Winter and Spring inonthe, was short. Fewer cattle than usual had gone into the feed lots. As events turned out, all the feed -lot cattle could have been consumed hi Canada. Instead of this, abnormally heavy shipments went to united States: As a result of the above conditions, in May and June an acute shortage of beef developed: Many shops for days on end Were entirely without beef, (Continued on. Next Page)