COMPANY MEETING

THE STEEL COMPANY OF WALES LIMITED

IMPROVEMENT IN TRADING RESULTS NEED FOR PRICE INCREASE PRODUCTIVITY GAINS ACHIEVED BY NEGOTIATION WITH TRADE UNIONS

THE Annual General Meeting of The Steel Company of Wales Limited, will be held in the Council Chamber of the Confederation of British Industry, at 21 Tothill Street, London, S.W.I, on Monday, 14th February, 1966, at 12 noon.

The following is the circulated statement by the Chairman, Sir Julian Pode, J.P., F.C.A., F.C.I.S.: In last year's statement I said that the Steel Corn- pany of Wales, having been formed in 1947, nation- alised in 1951, and returned to private ownership in 1957, was again threatened with nationalisation. Today, I regret to say, the threat remains.

This whole question has been carefully considered by the Chairmen of the principal steel companies, and on May 12th, 1965, they reported as follows: "The Chairmen of the privately owned steel companies named in paragraph 17 of the White Paper on Steel Nationalisation have unani- mously agreed the following statement.

We put this forward in the belief that the con- tinued effective functioning of the steel industry in the national good urgently requires a solu- tion taking the Industry out of political con- troversy. We believe that this view is widely shared by prominent and experienced members of all three political parties and by leaders in industry and commerce generally.

We do not stand on the status quo, but accept that to take steel out of politics, revision of the legislation currently governing the Industry's affairs is necessary: Any such revision would, of course, be a matter for the Government and Parliament; but we hope that it would be pre- pared taking into account the experience of the Industry, which would be freely available, and we believe that it could usefully be preceded by some speedy and authoritative enquiry.

We suggest that new legislation should estab- lish a new Authority, charged with supervisory control of the Industry and having the powers necessary to this end.

We believe that fully adequate control is obtainable without the need for State share- holdings in the individual companies. We en- visage the need for close links between the Authority and the companies to ensure that their policies in regard to Industry development conform to the guiding lines laid down by the Authority.

We accept that further rationalisation may well be necessary over coming years.

We believe that such new arrangements should be cast in a form facilitating entry into the European Common Market should this pro- ceed.

We believe that the Industry's common ser- vices should be incorporated in the Authority.

We have no reason to believe that these views are contrary to the thinking of the Steel Industry at large."

This statement has since been generally adopted by the whole Industry and should provide the basis of a liberal approach to future policy.

TRADING RESULTS

The trading results of the past year show a wel- come improvement, although of course the com-

parison is distorted by the strike in the previous year.

The results could have been considerably improved had it been possible, by an increase in selling prices, to recover cost increases which could not be ab- sorbed by greater efficiency. Unfortunately, this matter is still outstanding.

Adequate profits are obviously necessary to en- able the Industry to create resources for expansion.

EXPORTS Today the economic health of the country is more than ever dependent on exports. In the main, the exports of steel take the form of finished articles such as motor cars, commercial vehicles, machine tools, agricultural implements and the like. Never- theless a considerable direct export of steel is main- tained by the Industry and, in your Company's case, the export figures have increased from £30.4 million in 1963/64 to £32.2. million in 1964/65.

Due to intense world competition in steel in general, and in flat products in particular, export prices in many cases are extremely low.

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SALES An intensive sales campaign under the guidance of the Hon. M. J. Layton giving greater attention to individual customer requirements has enabled us to recover the major part of our share of the home market lost after the strike.

In the export field intense competition has called for an urgent increase in sales promotion. This has involved a large increase in overseas travel by mem- bers of the Sales Department.

PR ICES Apart from an inadequate increase of just over 1% in April, 1965, the maximum home trade prices allowed by the Iron and Steel Board for your Company's products have not been advanced since 1962. Approaches have been made to the Board in this matter, and a decision may have been made before this statement is in the hands of the share- holders.

Export prices have been low throughout the year, especially since the artificial demand from the U.S.A. came to an end following the settlement of the steel industry labour contract.

MANPOWER

Considerable gains in productivity are being achieved by negotiation with the trade unions. As a result, the manpower requirements in our Port Talbot Divisions will be reduced by 650 early in 1966 and by several hundred more later in the year. This arises -from the internal redeployment of craft mates to vacancies caused by retirement and by the re- lease of temporary employees. Your Company and the unions concerned have every reason to be pleased with the success of what is one of the big- gest agreements on productivity so far concluded in this country. It confers major benefits on the union members and at the same time should improve our efficiency and profitability.

Plans are now being prepared to achieve much greater advances in productivity. Progress in these rearrangements will be gradual, but every effort is being made to accelerate the work. We are en-

couraged by the success which we and the unions have jointly achieved so far, and are confident that it can be pursued to our mutual advantage in future. Many of the changes forced upon us by techno- logical progress create complex human problems. We realise that these problems call for exceptional understanding and humanity on the part of those responsible for dealing with them.

Ultimately it will be essential for new industries to be attracted to the Port Talbot and Swansea areas. Some success has already been achieved. But unremitting efforts must be made both by ourselves and Government Agencies to encourage new in- dustries to make the most of the valuable skilled manpower which will become available.

NEW bEVELOPMENTS

Studies of the likely future demand for our pro- ducts indicate that to maintain our share of the market we must increase and improve our produc- tion facilities. Proposals are being carefully con-• sidered.

These studies are still in progress but it is hoped that an agreed plan, carrying the approval of -the Iron and Steel Board, will soon be finalised. Some of the expenditure would be required fairly promptly. Other parts of the construction pro- gramme will be spread over a considerable period.

The Company's actual capital expenditure for the year was £7.8 million. The principal items com- pleted or nearing completion include the automation of the Abbey Hot Mill, the fourth Electrolytic Tin- ning Line at Trostre, the Fume Cleaning Equipment on four Open Hearth Furnaces, the new Research Centre at Port Talbot and, at Orb Works, the additional Decarburising Line.

When these are in full operation we should be able to improve both the quality of our products and our rate of profit.

PORT TALBOT HARBOUR

I am happy to report that the Minister of Trans- port has confirmed the National Ports Council's recommendation of the provision of deep water facilities for importing iron ore at Port Talbot. Apart from the saving in freight and handling charges, the Company will reap important benefits from being able to select its raw materials from any source. The British Transport Docks Board, in con- sultation with our engineers, is now completing plans for construction, whilst we are working on plans for the unloaders on the jetty and the equip-, ment for handling ore.

The Company will pay such sums as are necessary to service the capital laid out by the British Trans- port Docks Board. Final agreement on financial questions can be settled when we have assurance that the local rates payable in connection with this scheme will be reasonably in line with the pay- ments of rates on similar activities elsewhere. This matter is being carefully represented to the appro- priate Government Departments.

RESEARCH

More scientists have been recruited and many interesting and potentially productive lines of en- quiry are having their urgent attention. The new Research Centre at Port Talbot is now virtually complete. It is a fine building, constructed almost entirely of steel, of which we are all proud. We expect important benefits from the development of our research activities in this Centre and the Research Laboratories in Tinplate and Newport Divisions,

Our expenditure on research, both revenue and capital, is substantial but we feel that this is essential for the Company responsible for 72% of the tin- plate and about 25% of the sheet trade of this country.

THE NEATH STEEL SHEET AND GALVANIZING COMPANY LIMITED The total share of this Company, which has a considerable business in corrugated galvanized sheets, was acquired shortly after the end of the financial year. This is a business which we hope to develop in the future.

ROFTON HOMES LIMITED

We are anxious to develop the use of steel for house building as widely and efficiently as possible. -Wit1P this in view, your Company, in collaboration with Williams and Williams (Reliance Holdings) Ltd. and A. Roberts & Co. Ltd., has formed Rofton Homes Limited. This new Company aims to develop a system of house building using steel sheets as the basis of the structure.

MANAGEMENT

An important reorganisation in the senior execu- tive management has been made during the year. The new team is as follows:

Managing Director Mr. W. F. Cartwright Deputy Managing Direc- tor Mr. David J. Young Assistant Managing Direc- tor (Engineering, Re- search and Automation) Mr. I. S. Scott-Maxwell Assistant Managing Direc- tor (Marketing) The Hon. M. J. Layton Technical Director Mr. R. W. Evans Secretary and Chief Ac- countant Mr. R. P. Tovey General Manager, Iron and Steel Division .. Mr. C. E. H. Morris General Manager, Strip Mill Division .. .. Dr. D. P. Roderick General Manager, Tin- plate Division .. • • Mr. S. H. Stock General Manager, New- port Division .. .. Mr. R. P. Perry The principal changes are: (i) Mr. Scott-Maxwell takes charge of the schemes for future development and the co-ordination of technical services—this grouping is particu- larly aimed at the co-ordinated application of process control and data processing computers over the whole field of the Company's produc- tion and business activities: (ii) The huge works at Port Talbot has been made into two Divisions. One is concerned with the production of raw steel and the other with making it into coils and sheets.

EMPLOYEES I hope that shareholders will appreciate the effort made by the management, staff and other employees of the Company during the past year.

Your Company has emerged successfully from a Period of complicated reorganisation. In spite of many difficulties, we are now well set to secure greater productivity.

am confident that under the skilled leadership of Mr. W. F. Cartwright we have a team fully Capable of tackling the tasks which lie ahead.

DIRECTOR ATE I am pleased to say that Lord Kings Norton has accepted an invitation to join the Board and that he has been so appointed.

Lord Kings Norton has a national reputation in many spheres. Amongst other activities, he occupied the post of Chief Scientist of the Ministry of Fuel and Power from 1948 to 1954, and is at present Chairman of The Metal Box Company Limited. There are no other changes in the Directorate.

TAXATION AND DIVIDENDS As the change in taxation of industrial concerns has been fully debated elsewhere. I only propose to deal with the situation as it affects this Company.

Under the 1965 Finance Act there will be a re- duction in the tax assessed directly on our profits. Corporation tax at about 371% replaces income tax and profits tax totalling 564%. This benefit, however, will be more than offset by the fact that income tax deducted from dividends paid to our shareholders, hitherto retained by the Company, will, after 5th April, 1966, have to be paid to the Inland Revenue. This additional charge must in- evitably affect the rate of dividend which we can pay in the future.

FUTURE PROSPECTS The financial policy of the Government has aimed to damp down the demand for consumer goods. Unfortunately this has failed to curb the dangerous inflationary tendency following increases in wages and prices.

It is impossible to forecast Government policy in the immediate future. Although the demand for sheet steel may be less in 1966 than it was in 1965. the demand for tinplate may at least be maintained, partly because crop shortages in 1965 cut down the demand for canning materials.

In any event, increasing competition and rising costs arc certain to add to our problems.

Basically, however. we are supplying steel for the manufacture and equipment of a new kind of home that is comfortable, economical and im- mensely durable. We are producing most of the tinplate used for marketing food that is appetising, nutritious and handy. Our productivity is increasing. We have plans for future expansion.

The world demand for homes, food and trans- port seems to be unlimited. Provided we are ahle to concentrate on our task, it seems reasonable to look ahead with confidence.