Zurich Herald, 1944-09-21, Page 2CANADA PACKER,'
REPORT TO SHARE OL
The -seventeenth year of Canada Packers Limited closed March
30th, 1944.
Both in respect of Dollar Sales and weight of product sold, the
year established new records.
Sales were
,,... $306,155,937.74
Previous `high (Fiscal 1943) $169,141,670.71
Increase over previous high 22%
Weight of product sold, was 1,582,932,568 lbs.
Previous high (Discal 1943) 1,328,616,840 lbs.
• Increase over previous high
19%
Dollar sales were three times, and weight of product sold, twice,
those of the last pre-war year.
• • ®.
"Profit after taxes and depreciation was $2,167,336.76
Equivalent to 1.06% of Sales -
From this was set aside for Wartime
Inventory Reserve
Equivalent to
500,000.00
.24% of Salsa
Leaving Net Profit $1,687,566.78
•Equivalent to .82%
i.e. 4/5 of 1% of Sales •
Except that of the low depression year, -Fiscal 1932, -,this is
the smallest net profit in the history"of the Company, i terms
of percentage of sales.
Nevertheless, because of the record sales, the sum of the net
profit was the highest but one in the Company's"`;history. •
One other record was established.
Income and Excess Profits Tax• was
This was $600,000 above the 'previou''
Income and Excess Profits Taxes for the five
war years have been $9,531,025.76
In each of the war years, a sum has been set aside out of profits
for Wartime Inventory Reserve. The item this year is $500,-
000.00.
• `$3,0.23,214.06
. Fiscal 1942.
Several inquiries have been received as to the nature of these
items.
By the Department of National Revenue these items are treat-
ed as profits, and upon them full taxes have been paid.
And they are profits in every respect except one, viz. that all
or part of them are certain to be lost at some period following
the end of the war.
During the war, livestock prices have advanced to levels which
cannot be permanently maintained.
For example, present prices of cattle and hogs (on the Toronto
market), compared to those of the last pre-war year are
•
Good Steers (1,050 lbs. down)
live weight ............. $ 6.77 $11.70
B.4 Hogs -dressed weight ,. 41.90 17.20
As prices advanced, greater than usual profits were made. But
most of the excess has been paid to the Department of Na-
tional Revenue as taxes. There is no complaint regarding this.
In war time the Government must take• the extra war profits.
However, when the decline comes in the post-war period, losses
will be made, the counterpart of the extra war profits,
From this there will be no escape.
The Wartime Inventory Reserve is set
these anticipated losses.
The sums set aside for this reserve have
Fiscal 1940
1941
1942
1943
1944 ..,..
up as a buffer against
been:
579,000.00
380,000:09
L31'0,000.00
650,000.00
,'Sob;000.00
Total $3,4.19,.000.00
Whether this total is too much or too little, no one at present
can tell. But the following facts have a bearing: -
(1) To convert this year's inventory
(March 30, 1944) to the price basis
of the last pre-war year (March 30th,
1939) would require a reserve of $6,600,000.00
(2) In the deflation year 1920-21 follow-
ing the last war, the four Companies
which now comprise Canada Packers,
made a combined loss on operations of $5,500,000.00
0
On January 2nd, 1944, the final payment was made upon the
Collateral Trust Serial Debentures. The Common Shares are
now the Company's only outstanding securities. This is an im-
portant event in the Company's history, and the occasion seems
appropriate for carrying out a plan which the Directors have
had in mind for several years, viz. to make possible a wider
distribution of the Company's Shares.
,To this end, Shareholders will be asked at the forthcoming An-
nual Meeting to approve a By-law to subdivide and reclassify
the issued and outstanding 200,000 Shares of The Company,
Each Shareholder will receive with the notice of the meeting,
a copy of the By-law which contains full particulars of the
proposal.
• • •
The year under review is the fifth war year,
There seems good reason to hope that the end of the war in
Europe may now be in sight.. It is therefore an appropriate time
to look back over the war period as it has affected the Live
Stock Industry, (of which the Packing Industry is the marketing
branch).
The outstanding wartime feature of the Live Stock Industry has
been the phenom
should be aysincei t'ti
When Germany'03
of 1940,.one phas.
deprived of iinpkl;
serious loss was eta:
were cut off.
lila re -ase in production. The first word
bine ^ao;-the "Farmer's of Canada.
,estern Europe 'in the. early mouths
;disaster was- that Great Britain was
ces of food. in this respect the most
Girds of her external Bacon supplies
•
Canada was the on
could be replaced.
An, urgent appeal wa
measure of their i'es.
TABLE 1
orn which those Bacon supplies
de to.the Farmers of Canada, and the
is: indicated in the -following table:
Prior to 1940,. the t shipments of Bacon to
Great Britain in any; a 'ear had been -.. 192,000,000 lbs.
Following the appeal or�'40, shipments have been as.frellows:,
' During 1940 ,.";E i 344,1 0ob"•lbs.
„ 1.941 , 460,OQQO;a000 ,
,, 1942 .. . . . , x -524,000,000, »
494,4 (5 onthss esti 900,000,000`
�560,000,000
Tli, in export ; B'ac n ms all „:thee more plPnomenal,
when':i is. remember
(a,) that record incr have occurred also in production of
all. other forms roti live stock and live. stock products,-
Cattle, ,Sheep,: Pt"11-try, Cheese, 'Butter, Eggs;
(b) that these enoriu s increases have been achieved with
.a. farm population educed 26 per dent. (Labour Gazette,
May 1944). .
•' • •
Apart ,from the Farmer's patriotic response, three factors have '
been important in bringing about these phenomenal increases
in live stock production, They were: -
(1) that for live stock'a<td live stock products'there has been
an unlimited deinaid, whereas until recently cash outlets
for grain 11aO been restricted.
(2) that throughout the war period there has been a substan-
tial extra profit in Marketing. grains through the medium
of live "stock,.=as against selling them in the cash market.
that throughout there has been the stimulation of ad-
:vancing prices. The; measure of this advance is seen in
"the following table,;';1,vhich sets up the average price per
100 lbs. (Toronto .market) of cattle and hogs, for the
°' period' 1934 to 194 } --
TABLE 11- TORONTO MARKET
(
CAri'TLL "'
HOGS
1934
1935
1936
1937 -
193- -- 1940
1941 - -
1942.
1043
1944 (7 months)
Good St'e`er$ ,x
1,050.1b1„
down1, •Dressed
Live weig,hl Toronto
$ &8$ • ,: $10.95 $ .6b
5.79. IS ` . 11:38 .65,.,'
5,,O4 11:25 65'
6, 1193_
Premium for A's paid by
Province Federal
of Dept of
Packers Ontario Agric.
11.90
11.43
13.26
15.69
16.87
17.20
.6'S'
.65
.6b
.65
.65'
.40
$ . .65
.65
.65
_65 •$1.95
Total
for A'a
$11.60
12.03
11.90
12.51
111,55
12.05
14.55
16.99
18,17
20.20
Increase in price ;1939 -:1944 -Cattle - 73% ; Hogs -A's - 61%
The combined effect of the increal.e in production, plus advance
in price, is reflected in the follotYing table (Dominion Bureau
of Statistics)
TABLE 111
1939
Cash Income from Sales of
1940 '
1941 .. .....
1942 ..
1943
Live Stock
$1,95,386,000.
245,243,000
320,900,000
383,400,000
449, 716,000.
Increase 1939 to 1944
Number of Canadian farms,
approximately ..... • ..
Estimated number of farms selling live
-stock ....
Average, increase per farm, 1939 to 4944
$254,000,000'
700,000
509,000
"$508
The above table is the record of the sales of Live Animals only.
In addition, -Animal Products comprise Poultry, Eggs, Butter,
Cheese, Milk, Wool, Fur Farming. The complete picture is that
•of Animals plus Animal .Products, as shewn inthe fallowing
table (Dominion Bureau' of• Statistics) :=
TABLE IV,.,
Cash .lnco'1ne fratu Sales of Animals phis Animal Products,,
1939 .
1940 . . ...
1941.:.
1942
1943
Increase 4939 to 1944 ,1
Estimated number ofr farnis selling
animals and aninia) products .
Average increase per farin 1939 to 1944
$364,224;
428,503/000.'-
558,808,000
718,166,000 '
834,184,000
$470,000,000
600,000
$783 •
In the marketing of live stock, the Packing House is an essential
link. For live stock as such cannot be consumed. The Producer
sells his animals to,the Packer, who processes them and markets
the products. The Packeriin" short, is the Farmer's marketing
agent, Packet
in
follows that the operations of the Packing Industry are of vital
interest to the Producer. Litfor'tunately, no complete Profit and
Loss record exists for the4whole Industry.*
In cases where informations lacking for the Industry as a whole,
the records of Canada Parker's will be used. These have been
published in full, each yearisince-the formation of the Company
iii 1927.
Because of its importance
under review, ishere r
)f Canada Packers, for the year
di'1t, iii -8 h jie form;
TABLE V
The statement shows the distribution of each `100.00, of Sal*
Out of each $100.00 of Sales, the following
sums were paid: -
To Producers, for live stock 3 08
To Suppliers .. ... • . . 6.77
3.45 14.90
.01
1.59
To Employees
To Service Organizations ...
To Bondholders
'1'o Taxing Authorities
The above items were paid out to per-
sons other than shareholders. They total 698,50
The remainder was retained by the Com-
pany for the benefit of Shareholders .. 1.50
Add income from investments
1
Gross :.,Profit out of each $100.00 of
sales -
From. this sum of $1.51 there was set aside:
For, Depreciation .69
For Wartime Inventory Reserve .2'4
.821
$83.60
$1.51
Remainder, Net Profit
Out of this remainder, dividends were paid
to Shareholders .
The balance was retained as working capi-
tal for the extension and improvement of
the business
* The Dominion Bureau of Statistics publishes an annual review
.39,
.43
''Slaughterin'g and Meat Packing."
This review contains much,' useful information, but includes no state-
ment of profit of the Industry as a whole. ,•
Such a statement could easily be added, and the value of the report
thereby greatly enhanced. Publication of total results need involve no
disclosure of the results of individual firms.
This story of the year's operations is reduced to still simpler
terms, if condensed and transposed as follows: -
TABLE VI
Packer's Selling Price ,$100.00
minus Operating Expense $ 14.90
minus sum retained by
Packer 1.50
46.40
A
B
C
leaves a remainder which
is paid to the Farmer
for his live stock $ 83.60 D
(For convenience in reference, these items are designated
A, B, C, D.)
Sales from the processing of 'live stock comprise only about 60 per cent
of the business of Canada Packers. Other Canadian farm products corn-
prise
omprise a further 30 per cent.
In the calculation of Tables, V and VI it Is not feasible to segregate
the percentage of the dollar paid for live stock only. The margin of
error is small. The basis of the calculation is the same each year; so
figures are comparable from year to year.
It is hoped that every Farmer who reads this report will carefully
examine Table VI.
p' -"•?u ... y;x.uki
fi iifa 1s condensed the `ecottoinics' of the Live Stock Industry.
.The Live Stock Industry is a joint operation between the Fernier
who produces, and the Packer who processes and sells. Much
discussion regarding the Industry seems .to take it for granted
that the interests of the Producer and the Packer are opposed.
The fact is their interests are not opposed, but parallel.
As to the interest of the Producer, there can be do doubt. He
wishes to get the highest possible return for his live stock, -in
other words he wishes that Item D should be as high as
possible.
The factors which bring this about are revealed in Table VI,.
They are:-
1. That Item A, -the total sum for which the products are
sold, -should be as high as possible.
In this at least, the interests are parallel. For the Packer
constantly strives to get the highest possible price for his
products.
That Item B, -the .Packer's operating expense, -should be
as low'as possible. In other words, that his efficiency should
be as high as possible.
It is certain the Packer works constantly, in his own interest,
to improve his efficiency.
And in this he is working equally in the interest of the Pro-
ducer.
3. That Item C, -the sum retained by the Packer, -should be
one which the Producer cannot challenge.
Here, on the surface, the interest of the Producer and the
Packer may seem opposed.
And it is true that if the Packer receives more than he
should, to that extent the Producer receives less than he
should.
How much does the Packer receive?
No record is available for the total Industry. However, the
results of Canada Packers have been published annually
since the formation of the Company in 1927.
In the 17 years -
the highest Net Profit was 2 8% of Sales
the lowest Net Profit was 7e, of .Sales
average Net Profit for the •17 years was 14% of Sales
For the year raider review, it has already
been seen that Net Profit was ,82%, i.e. 4/5 of 1%n
Probably in no other major industry is the percentage of
profit so small. And to the Producer, it is only the percen-
tage which matters. The Producer is concerned with one
question only. That'is: how much does he get backout of
each sales dollar?
• • •
(Continued on Next Page)