THE AUSTRALIAN ESTATES COMPANY LIMITED

Sir Denys Lowson on improved results

STEADY GROWTH

The Annual General Meeting of The Austra- lian Estates Company Limited will be held on July 14, at Estates House, Gresham Street, London, E.C.

The following are extracts from the circul- ated statement by Sir Denys Lowson, Bt., the Chairman: Total Revenue at £2,617,662 showed a con- siderable improvement over the amount of 11,747,794 for 1967. The improvement was due mainly to better results from the sheep and cattle stations, partly offset by lower results from Victorian Agency, again chiefly the result of drought conditions prevailing over much of that State as well as increased administration costs. A small part of the increase arises as a result of the devaluation of sterling in November 1967, the whole of the 1968 profits being converted at the new rate. The Queensland Agency profit slightly ex- ceeded that for 1967, and so was again a record. This was due to the sale of more bales of wool, better results from branches, and record earnings from merchandise and pro- perty sales.

Whilst the Company's two sugar mills pro- duccd a record total tonnage of sugar, the overall profit uas a little below that for 1967; this was due largely to there being a smaller credit in 1968 for adjustments to the previous year's sugar price, which has to be estimated for purposes of the Company's accounts, coupled with the low world price before the new International Sugar Agreement and which applied in effect to all our output of sugar in excess of the prescribed mill peaks.

Depreciation and amortisation of fixed assets increased from £794,657 in 1967 to £1.003,833 in 1968; a small part of this increase being due to devaluation. Taxation requires £516,877 this year against £282,319 in 1967; this is the result of the improved profits as well as the increased rate of company taxation which has gone up from 421 per cent to 45 per cent both in Australia and in the United Kingdom. The Directors recommend the payment of a divi- dend on the Ordinary and "A" Ordinary shares of 6 per cent, less income tax, which will require £189,094, as compared with 5 per

The Chairman and Sir Keith Officer, on the right, when visiting the Company's produce store in Melbourne which sold more than a million hides and skins in 1968; with, from left to right, Mr. R. F. Ingram, Wool and Produce Manager; Mr. G. H. Colman, Australian Director and General Manager; Mr. A. C. Rankin, Manager Produce Store; Mr. G. G. Loveless, Manager

Victorian Agency.

cent last year requiring £157,578; the total cost includes income tax thereon amounting to no less than £78,000 which has to be paid over to the Inland Revenue. Shareholders N\ ill remem- ber that up to the year 1964 dividends cost the company only the net amount after deduction of income tax and the total di‘idend, with bonus, of 14 per cent paid for that year only cost as much in cash as a dividend of approxi- mately 81 per cent would cost under the terms of the Finance Act, 1965. For the last three iears the dividend has been held at 5 per cent; but it was felt that with the improved results for 1968 it was appropriate that an additional per cent should be recommended for pay- ment; even then the approval of the Treasury aas required and this has been obtained. As on previous occasions a transfer (f100.000 this war) has been made by the Group to Drought Reserve so as to meet any special drought expenditure which may be required in future and help to even out fluctuations in our results arising purely from climatic conditions. It is our policy to build up this reserve when climatic conditions are favourable and to draw on it in adverse years. The total amount ear- ned forward by the Group has increased from £1,137,358 to £1,292.789.

PASTORAL—SHEEP

Apart from Oolambeyan, which experienced CO, severe drought conditions for the first five months of 1968, all other New South Wales properties had a mostly satisfactory year. In Queensland, rainfalls were generally below average, but all properties managed to get through satisfactorily; although conditions deteriorated towards the end and some breeders with Iambs had to be fed. Sheep num- bers increased by 4,800 and a record lambing of 91 per cent was achieved. Total greasy wool at 7,350 bales was 1,250 bales more than in 1967. Mortality was 7 per cent compared with 4 per cent in 1967.

Further success at shows came to all three studs. Raby again took a major Sydney award by winning the Grand Champion Merino Wool Ewe Award. Terrick Terrick Stud also performed well at the Longreach State Sheep how in Queensland, taking top honours, with the Grand Champion Strong Wool Ewe, as \tell as the Medium Wool Ewe; it also won the top awards for the Grand Champion Strong Wool Poll Ram and Poll Medium Ewe, amongst ' many successes in the junior and other sections. Dolambeyan, after being absent from the 1967 Australian Sheepbreeders' Association Mel- bourne Show because of seasonal circum- stances, won the Grand Champion Medium Wool Ram in 1968.

PASTORAL—CATTLE

Rainfall on the north-western Queensland properties was better than in 1967, but on most properties was light in the second half of the year, and pastures at Burleigh. Canobie, Dalgonally and Granada were very dry at the end of the year. Kamilaroi and Millungera had good rain in December and pastures were good when the year ended. Chatsworth. and the ad- joining property Burnham, again experienced a year of below average rainfall, although about an inch 'more rain was recorded than in 1967. Pasturage became sparse and some cattle had to be agisted on outside country during the second half of the year. Seasonal conditions were satisfactory at Kooralbyn and Wainui, although not as good as the previous ear. During 1968 Tanderra was sold, and the Northern Territory stations of Cresswell Downs, Eva Downs and Walhallow were pur- chased, amounting to 5,000 square miles, reflecting the Company's aim of obtaining large areas, and long-term leases. The season on the Northern Territory properties has been good and they finished the year with adequate feed available. As stated last year, the recent Introduction of the good beef roads has made these properties accessible in a way which did not exist until the last two or three years. We believe that here again we will ourselves be able to make a major contribution to one of Australia's primary industries.

Brandings on the Queensland properties were about 3,600 more than in 1967, reflecting better seasonal conditions in the last two years. Total numbers of cattle increased from 131,000 at the beginning of the year to 160.000 at Dec- ember 31, including 31.500 on the Northern Territory stations; but they are still below the potential of our properties. Sales of cattle amounted to 25,000 head. Of these 22.5(X) were from Queensland stations which compares with 16,000 cattle sold from these stations in 1967. Prices for cattle continued their upward trend, and the average price realised in 1968. about SA Ill, was the highest average yet recorded, and compares with the previous highest of about 5A94 in 1967.

SUGAR The 1968 crushing season was one of oper- ating records in the Australian Sugar Industry, when a total of 2.725010 tons 94 n.t. sugar was produced; Queensland mills made 2.604.000 tons. The Company's two mills produced their own records. Kalamia crushing 705,000 tons of cane for 111.000 tons of sugar and Pley- stowe 678,000 tons of cane for 107,0011 tons of sugar. Company sugar production was a record 218,0(X) tons, being again the third highest in Queensland. This total includes the sugar equi- valent (about 50,000 tons of sugar) of some 65,000 tons of Cane Insert made by Pleystowe on behalf of the Australian Sugar Board for export to Japan.

All Australian 1968 sugar production was sold, a large quantity being at world prices which, although better than in the previous year, were still at low levels. Compensation of about $A6 million paid by the Common- wealth Government to offset the effect of sterling devaluation improved returns to the Australian industry. Since the new Interna- tional Sugar Agreement was negotiated late in 1968. and following its de facto entry into force from January I, 1969. free-market prices have improved. Australia's Negotiated Price Quota of 335,000 tons under the British Com- monwealth Sugar Agreement is unchanged, and the price of 1:43 lOs sterling a ton for this amount of sugar will continue for 1969 to 1971. The Agreement w ill now remain in force indefinitely, subject to review every three years. The U.S.A. quota granted to Australia for 1968 was 174.0(X) tons and the present Australian quota for sales to the U.S.A. in 1969 is 164,000 tons of actual sugar.

GENERAL Australia's growing economic strength was demonstrated by a real growth rate in 1967-68 of about 4 per cent, despite the recurrence of drought conditions over most of the eastern States. A substantial improvement in this rate of growth, possibly up to about 8 per cent, is anticipated for the current year. Whilst there has been some adverse movement in the Australian balance of trade, this has been off- set largely by sustained capital inflow; con- sequently the balance of payments situation is still satisfactory. Australia has achieved recog- nition as a very progressive economy and can look forward to further strong economic growth.

1 visited Australia for several weeks early in 1968; while my colleague. Sir Keith Officer, again carried out a comprehensive inspection of the Company's interests in Australia. He visited our new Cresswell Downs group of cattle stations in the Northern Territory, a large number of other stations, each of the two sugar mills as well as a number of branches, and also had useful discussions with the General Manager and staff at Head Office in Melbourne. Since the close of the year we have elected two new Directors to the Board, Lord Rupert Nevill—who has strong family connections with Australia, and my son Mr. Ian towson—who spent a considerable period in the early months of 1968 visiting our prin- cipal offices and organisation throughout Australia.

CURRENT YEAR In eastern Australia, w here most of out operations take place, the present w inter season offers a sharp contrast. The southern part, including most of New South Wales and all of Victoria and south-eastern South Australia, enjoys seasonal prospects which are more favourable than for a number of years past. The northern area, including the greater part of Queensland, is experiencing partial to sesere drought conditions with losses of livestock: there is only a small probability of relief rains falling before December.

Our three New South Wales sheep properties are now in very good condition, haying received well above aserage rainfall. Queens- land prospects are not so promising. If useful winter or early spring rains are not received. the Queensland sheep properties w ill probably be faced with a difficult late Australian spring and early summer. Rainfall during the mon- soonal period was well below average on most of our north-west Queensland cattle stations. For instance. Chatsworth. which has had well below normal rainfall for eight out of the last nine years, is the worst affected and stock numbers are being reduced accordingly. Drought conditions throughout a large part of Queensland have deflated prices for cattle, particularly stores. Values for the latter are expected to improve, how eser, when general rain falls; there are indications that prices lot fat cattle will return to near the levels of last year before the end of 1969.

Most Queensland sugar areas south of Townsville have suffered drought again this year, particularly the Bundaberg and Burdek in districts. Consequently, and because there has also been some restriction of crops by growers, arising from the International Sugar Agree- ment, Queensland sugar production in 1969 will be less than the record 1968 figure. Lack of rain in the Burdekin area has severely re- duced underground water levels, which arc again causing concern; low river flow has meant little water available for artificial replenishment. but pumps have operated when- ever possible. In the Mackay area, although rainfall has been well below average, there have been some useful well-spaced falls; and as a result cane crops there are fair. Our two mills each expect to crush about 600,000 tons of cane; both are likely to produce in excess of their theoretical "peak"' sugar quotas. and there is a good crop on our own farms at Kalamia.

World sugar prices have improved since the International Sugar Agreement came into force, and arc now above the loss point of the price range aimed at in the Agreement. Pro- duction quotas of exporter members of the Agreement have been sct at 90 per cent of Basic Export Tonnages. Quotas w ill be re- viewed during the year by the Executive Coun- cil of the International Council. and may be adjusted upward in the light of world produc- tion and consumption and other information available to the Council when the reviews are made.

The improved prices will offset the enforced lower production at our mills, and sugar. results in 1969 are likely to be somewhat bet- ter than last year.

It is naturally -too early yet to forecast the Company's total results for the current year, but we look forward to producing a satisfac- tory report in 12 months' time, especially having regard to our substantial overall cash flow.