Zurich Herald, 1945-09-13, Page 2AN
A
AC
.PORT TO SHAREHOLDERS
DISTRIBUTION OF SALES DOLLAR
The eighteenth year of Canada Packers Limited closed March
29th, 1945.
It was the sixth war year, Both volume and result of operations
were determined largely by. war conditions.
In each year since the beginning of the war, dramatic increases
have been achieved in Live Stock and general Agricultural pro-
duction. These were reflected in corresponding increases in
volume of Packinghouse operations.
In the year under review the increase in volume continued, but
at a reduced pace.
The following table sets up, for the last pre-war year (ended
March 1939), - and for the war period, the record of Canada
Packers' operations in terms of: -
A.
B.
C.
D.
E.
Dollar Sales
Weight of product cold
Net Profit
Profit as percentage of Sales
Profit per pound
TABLE NO. 1
A B
1 ear Dollar
Ended Sales
Weight of
Product Sold
C D E
Profit
as Profit
Net % of per
Profit Sales Pound
March
March
March
March
March
March
March
1939
1940
1941
1942
1943
1944
1945
$ 77,225,732
88,205,639
110,291,839
144,500,292
169,141,671
206,155,938
228,398,111
800,763,592 lbs.
913,251,116
1,091,263,352
1,228,020,942
1,328,616,840
1,582,932,568
1,698,326,055
INCREASE
1945 over 1939 106% 112%
1945 over 1044 11% 7%
® ® m
$1,238,736
1,667,809
1,555,028
1,611,465
1,611,418
1,687,587
1,824,811
47%
1.6%
1.9
1.4
1.1
.95
.82
.80
1/6c
1/5
1/7
1/8
1/8
1/0
1/0
WARTIME INVENTORY RESERVE
Following World War 1, losses of the deflation period (1920-
21) wiped out the wartime profits of Most Canadian Packing
companies. So severe were those losses that ultimately they
made necessary a widespread reorganization of the Industry.
By reason of inflation -control measures erected during World
War 11, it is hoped that post-war losses will this time be much
Tess severe. Nevertheless, at some stage following the war, de-
flation losses seem inevitable. Prices of Live Stock products
have advanced to levels which, -it would seem, -can not be
permanently maintained.
This view is supported by the following table, which compares
present prices with those of 1939. _
TABLE NO. 2
COMPARISON PRICES LIVE STOCK PRODUCTS
1945 AND 1939 •
Good Steers, live, Toronto -
Hogs, B-1 dressed, Toronto -
Lambs, live, Toronto - -
Chickens, Milk Fed A, Toronto
Eggs, "A" Large, Toronto -
Creamery Butter Toronto -
Cheese, f.o.b. factory, Ontario
Average Average
March March
1045 1939
$14.54 $ 6.78
- 19.42* 12.25
- 14.95 9.10
- .35 .241/2
- .35 ,241/2
.431/2* .21 /
.23* . .14
*Subsidies, Federal plus Provincial, included in 1940, prices -
Hogs - $1.62 per 100 lbs. Butter -8/c per lb.
Cheese -3c per lb.
® 0 46
To meet the anticipated Inventory losses, in each war year a
sum has been set aside as Wartime Inventory Reserve. That
sum for the year under review was $581,000.00.
The total reserve set up during the war period has been: -
Year Ended
March 1940
March 4 941
March 1942
March 1943
March 1944
March 4 945
Total - -
- $ 579,000.00
380,000.00
1,310,000.00
650,000.00
500,000.00
584,000.00
▪ - $4,000,000.00
This total of four million dollars may be too much or too little.
No one at present can tell. It is hoped it may prove too much,
in which case a portionof it will ultimately be transferred to
the Profit and Loss Account. That all of it might be needed
may be seen from the following facts: -
1. To convert this year's Inventory (March
29, 1945). to the price basis of the last
pre-war year (March 30, '1939), a reserve
would be required of $5,600,000
2. In the deflation years following World
War I,--- (1920-21), the four companies
now comprising Canada Packers, made
a combined loss of" $5,500,000
Upon all the sums set aside as Wartime Inventory Reserve, full
Income Taxes have been paid, and except that they may be
needed to offset post-war Inventory losses, these sums might
properly be treated as profits.
Had this course been followed, and had no Inventory Reserve
been set up, Columns C, D, E in Table No. 1 would have ap-
peared as follows -
Year Ended
March 1939
March 1940
March 1941
March 1942
March 1943
March 1944
starch 1945
TABLE NO. 3
Profit as
Percentage Profit per
Profit of Sales Pound
$1,238,736 1.6% 1/6¢
2,246,809 2.5 1/4
1,935,028 1.8 1/6
2,921,465 2.0 1/4
2,261,418 1.3 1/6
2,187,587 1.1 1/7
2,405,811 1.1 1/7
TABLE NO. 4
Out of each $1.00 of Salus in the respective years, the follow-
ing sums were paid:- 2.
To Producers, chiefly for live stock
To Employees (salaries, wages and
bonus) -
To Service Organization,'i.
To Suppliers - - - -
To Bondholders - - -
Taxes - y- - -
Total paid to perso
Shareholder*
Set aside for Depreciafi
1945 •
- 82%3¢
-
71/3
37/
3%3
184
1' other than 98%8¢
Remainder -retained fo
Shareholders,'
Set aside for Wartime 1.
e benefit of
ntory Reserve
Remainder -Net Profit'' - -
Paid to shareholders as di;(idends -
•
Balance retained as Working Capital for
extension and' improvement
of the business-
ft,�
99¢
1939
8.7/8
41/3
22/3
/
y4
97%¢
983¢
volume, was that of doing the jab at a reasonable margin of
profit.
In respect of profit, the facts are not available for the •total
Industry.
indicate Packers the largest
ssutand
results
probably fairlythoseoftheIndutryasawhole.
A comparison has already been given (Table No. 4) of the years
1939 and 1945. But a comparison of the six-year war period
with the six-year pre-war period gives a more complete picture.
This is presented in the following table, No. 6.
TABLE NO. 6
COMPARISON OF OPERATING RESULTS
6 pear pre-war period, 1934-1939 inclusive,
and 6 year war period, 1940-1945 inclusive
Average
Average
Average
Average
Average
Sales
:Profit before Taxes
Taxes
Net Profit (after
Taxes)
Net Profit as per-
centage of Sales
(d as to a)
Pre-war Period War Period Percentage,
1934 - 1099 1940 - 1945 Increase
a.
b.
c.
d.
$68,057,735
1,096,360
379,085
.1157,783,748 132%
3,857,794 127%
2,198,108 478%
1,316,384 1,659,686 26%
1.9% 1.05% decrease 45%
4 ¢ 1 ¢ 1 In summary, therefore, the record is as follows: -
1
CAPITAL STRUCTURE
During the year, effectwas given to the plan of subdividing the
Shares, announced in the last Annual Report. The Capital struc-
ture of the Company is now as follows: -
Bonds
'A' Shares,. carrying a cwnulative
preferentialdividend of
$1.50 per share - 400,000 shares
Amount of dividend - -
'B' Shares, upon which is paid
a present dividend of
5oc per share ';' - 800,000
Amount of dividend - -
None
shares
$600,000
$400,000
Total Dividend - - - $1,000,000
WAIL ANDPOSST-WA-i NT EXTENSION
During the war years, due to greatly increased volume, the
strain upon the physical equipment of the plants has been
severe. Plant extension has necessarily been held to a minimum,
but expenditure for upkeep has been much increased.
Sums charged to Fixed Capital during the war period are re-
vealed by the following: -
Fixed Assets (Balance Sheet 1945) - $23,720,750
Fixed Assets (Balance Sheet 1939) - $21,636,385
Additions to Fixed Assets during war period $ 2,084,365
Plans have already been completed for a substantial programme
of plant replacement ands°extension in the post-war period. So
far as possible, construction ° will be delayed until a slackening
occurs in general industrial activity.„
® ®•
Following the close of thewar in Europe, it is appropriate that
this Report should deal with. two .main subjects:-
1.
ubjects.4. A review of the performance of the Packing Industry
during the war period.
2. .An estimate of the outlook for Live Stock in the post-
war years.
1. THE WARTIME RECORD OF THE PACKING INDUSTRY
The first, and paramount duty of the Industry was that it man-
age to process the greatly increased deliveries of Live Stock.
That this was not a simple matter, is evident from the follow-
ing comparison of inspected slaughterings for the years 4944
and 1939: -
TABLE NO. 5
NUMBER OF ANIMALS PROCESSED, INSPECTED HOUSES
1944 1939 Increase
Hogs - 8,766,441 3,628,369 142%
Cattle - - - 1,35.4,104 872,574 55 %
Sheep and Lambs 949,096 786,274 21 o
Calves - - - 660,556 679,922 -3%
Increase in Total weightof meat produced 113 c/o*
*Average warm dressed weight of animals killed; --
1944 1939
Hogs -
Cattle - -
Sheep and Lambs -
Calves - - - - •
Authority; Meat Board, Ottawa.
165.4 lbs.
502.1
43,5
119.2
3.50.4 lbs.
466.2
42.3
106.6
Considering that plant capacity in, 1939 was in scale approxi-
mately with then inarketings, the.tasl of coping with this en-
ormous increase in volume was a difficult one.
Substantial extensions in plant were, of course, necessary; but in
the main the handling of the increased deliveries was achieved
by `adjustments', especially by increase in numbers of personnel
and of shifts. Proof that the job was effectively done lies in the
fact that only in two short periods throughout the 51/2 years,
was the flow of Live Stock slowed up, due to congestion at the
plants.
Next to the obligation of processing this great increase of
The essential job of processing increased deliveries of Live
Stock was accomplished without block, and without invoking
financial assistance from the Government.
Many 'war contracts involved large advances by the Government
for plant. And in most cases the contracts provided for a profit
(before taxes) of 5 per cent.
The profit of the Packing Industry (before taxes) was approxi-
mately 2.45 per cent.
Of this, 1.4 per cent was returned to the Government, as In-
come .and Excess Profits Tax, leaving a net profit to the In-
dustry of 1.05 per cent.
O 0 0
2. OUTLOOK FOR LIVE STOCK IN THE POST-WAR YEARS
The increase in. Canadian Live Stock production was a vital
factor in the Allied wa:r. effort. Credit for this achievement be-
longs entirely to the Canadian Farmer. The Packing Industry
can claim no part of it. •The Packer is simply the processing
element in the Live Stock Industry. His volume is determined
entirely by the numbers of Live Stock brought to market.
Cattle and Hog populations are now at levels much higher than
those of any pre-war date. When war demand is over, the, sur-
plus will be such that, unless outlets can be maintained much
larger than those of the pre-war period, .the increased produc-
tion in itself might become a threat to the level of Live Stock
prices.
What, then, is the prospect for Live Stock prices in the post-
war years?
Concerning the period immediately ahead, there is no doubt.
The outlet is assured. Great Britain has already contracted to
buy (at present prices) all the Beef and all the Pork product
which Canada can ship, up to the end of 1946.
•
As to the period 1947 forward, the problems of Cattle and
Hogs must be considered separately.
CATTLE
Cattle production in Canada has always been limited by the fact
that production costs are higher than in Southern hemisphere
countries, especially Argentina, Brazil and Australasia. For this
reason, Canada has not, in the past, been able to compete .in
the open Beefmarkets of the world. The chief open market has
been Great Britain.
•
However, though excluded from the open markets, Canada has
had a measure of preference in the chief protected market, viz.
-United States. To that country, until wartime controls diverted
the flow, Canada shipped about 200,000 Cattle yearly. And
her production of Cattle was regulated roughly to meet Can-
adian domestic requirements, plus the 200,000 head shipped to
United States.
On July i'st, 1942, for reasons of war expediency, an 'embargo
was placed against this movement of Canadian Beef Cattle to
United States. Thereafter, the flow of Canada's surplus Beef
was to Great Britain. During 1944, shipments of Beef totalled
406,000,000,1bs. And during 1945', it is expected shipments
will be substantially heavier.
However, Great Britain cannot be counted upon as a perman-
ent market for Canadian Beef. When world supplies catch up
with world demand, it seems certain Canaria will again find
herself unable to compete with Beef from Southern hemisphere
countries. It is hoped that Canada's outlet to United States by
that time will have been reopened, and possibly enlarged. That
outlet has always been, and will again be, of vital importance to
the Canadian Cattle Producer.
In the long run it may be necessary that Canada adjust her Cattle
population to the same principle as in the pre-war period: -
that of meeting domestic requirements for Beef, plus agreed
shipments to United States,
But this does not mean returning to the numbers of 1939. Can-
adian requirements will be much heavier than in the pre-war
years. Per capita consumption of Beef has advanced from 53.2
lbs. in 1939 to 61.7 lbs. in i944. And if purchasing power per-
mitted, Canada's Beef consumption could easily advance to 70
lbs. per capita. (In 1943 it actually reached 69.3 lbs.) Out of
the war has come a new understanding of the nutritional value
of meats as a protective food, also a new concept of the import-
ance to the nation of maintaining its chief asset, viz. the health
of its citizens, at the highest possible level.
An enlightened National policy should see to it that the ex-
perience of the '30's shall not be repeated, when great stores of
unsaleable food depressed its Agriculture, while at the same
time a large section of its population went undernourished. The
establishment of a high internal standard of nutrition would in
itself be an important safeguard of the welfare of Canadian
Agricul titre.
(Continued on Next Page)