FINANCE

THE REVIVAL IN SHIPPING —LORD ESSENDON'S VIEWS

AN outstanding feature of the Stock Markets during the past 18 months has been the activity and strength of the shares of Shipping companies. Probably no industry throughout the country—unless it be the textile—has suffered more from world depression than shipping, and there must be few of the shipping companies whose shares during the past decade have not established low record prices. Even when the tide of depression began to turn, so far as our domestic trade was concerned, the recovery in international trade was so slow that shipping freights remained at an abnormally low level and, indeed, in the case of tramp shipping the Government had to come to the rescue and grant a subsidy.

RISE IN SHARE QUOTATIONS.

Gradually, however, and commencing, perhaps, rather more than two years ago, conditions began to improve. Prices of commodities began to rise and the advance was followed by an upward movement in freight rates. This movement steadily gained momentum until in place of keen competition for the carriage of goods it began to be a question in some trades and industries, at all events, of an actual shortage of tonnage. These changed conditions were bound sooner or later to produce their effect upon the shares of shipping companies, and some idea of the recovery which has taken place may be gathered from the table in next column showing how present prices compare with the lowest point touched during the past 18 months. With the exception of Larnport and Holt, where the shares are of the nominal denomination of 6s. 8d., all quotations refer to shares or units of stock of the nominal value of LI.

From the table opposite it will be seen that the recovery in some cases has been almost sensational in character, though at the same time present quotations in many instances are well below the highest points that have been touched in normal times. To take one instance alone, P. and 0. Deferred, which is now quoted at about 34s. 3d., has been well over La, or to state the position more accurately, when the stock was in denominationi of £100 the quotation went over £200.

Lowest price since Price Jan. 1st, Jan. -4th, Present Rise from 1936 1937 Price Lowest Clan Line .. • 5 i .8} 91 - 34 Cunard 4.'11-

7/3 6/4}

2:3

E. D. Real'n.. 38, to} 53/9 5210 13114 Furness Withy 15 'to} 26/o 29/oxd 13;1} King Line Od.

12:0 19/6 32/3 30,13

Lampt. H. Ln. 3/91 10;7} 15/11 11:31 Orient St. Ord. .. 4510 51/3 47/6 2/6 P. & 0. St. Dfd. 18,f0 29:3 34/3 16/3 R.M. Real'n 3943 59,b 51/o 12/0 Do. 5% Inc. Db. .. roo 107 : 107} .74 FURNESS WITHY MEETING.

Not the least striking of the movements in prices shown in the foregoing table is the rise which has taken place in the shares of Furness, Withy and Company, and the Chairman of that Company, Lord Es:?...ndon, certainly ranks among the foremost experts today in the shipping industry. In view of that fact and the amount of attention which is now given by the markets to the rise in shipping shares, exceptional interest has been taken this week in the address which was delivered by Lord Essendon last Tuesday to shareholders of the Furness Withy line. Realising, no doubt, the tendency for unduly optimistic views being taken just now by specu- lative operators in shipping shares, Lord Essendon was exceedingly cautious when dealing with the prospects not only of his own Company but of those of the shipping industry generally. Of the improvement which has taken place in the fortunes of Furness, Withy and Company during the past two years there can, however, be no question. A year ago Lord Essendon spoke hopefully with regard to the prospect of an early resumption of dividends, and his hopeful view has been justified as the directors are now able to recommend the payment of a 3 per cent. dividend upon the Ordinary share capital after a lapse of three years in an otherwise unbroken record of forty-six years.

INCREASED PROFITS.

Moreover, this resumption of dividends is thoroughly justified by the financial results for the year; the profit fa the twelve months, after providing for expenses of every description, is £544,000, or an improvement over the previous year of approximately L130,000. A large amount had been brought in from the previous year, so that there is a divisible surplus of L755,000, and after paying the usual half-yearly Preference dividend, no less than £350,000 has been transferred to Depreciation Account, and after paying the 3 per cent. dividend on the Ordinary Shares a sum of £213,812 is carried forward.

FAITH IN THE FUTURE.

So much for the improvement which has taken place in the financial position of Furness, Withy and Company, and Lord Essendon was equally reassuring with regard to all the details of the Company's accounts. Moreover, while, as mentioned later, he displayed caution with regard to the shipping outlook generally, the interesting fact stands that a very large holding has been acquired by Furness, Withy and Company in Royal Mail Lines, Limited, a company which has not only made great progress in the matter of profit- earning, but has established a very strong financial position as disclosed in the balance-sheet.

No " Boom."

When, however, it came to be a question of summing up future prospects, Lord Essendon deprecated the fact that so much should be written of what are described as " boom " conditions and he drew attention, among other things, to the many fears of depression and also to the great increase which is taking place in working costs as expressed in wages and the price of coal and oil fuel, while, quite apart from N.D.C. taxation to which the shipping companies will contribute their share, Lord Essendon pointed out the serious effect upon the cost of shipbuilding produced by the activity expressed in our rearmament policy. He said : " From actual figures I can give an example of three more or less sister ships which were contracted for over a period of a few months by one of our associated companies. The second vessel cost 121 per cent. more than the (lest and :the third -cost, 35 per: cent, more,- and a fourth quotation, which was not accepted, was at a figure 55 per (C6ii!'inua on page iii)

FINANCE

(Continued from page 220.) cent. more than the original contract. I believe the percentage would be even higher today."

Considerations such as these. were responsible for Lord Essendon taking a cautious view with regard to the outlook —a caution increased by the uncertainty of the political outlook. Reading between the lines of his speech, I fancy 'that Lord Essendon would have had no difficulty in taking a wholly optimistic view of the future, if a. speedy disap- pearance of the apprehensions of war, with . its effect in stimulating economic nationalism which, for so long, has stood in the way • of expanding international trade, could be safely assumed. Meanwhile, however, . the leaders of our Shipping industry have exercised their faith in the preservation of world peace by building such new ships as may be required, and, in fact, proceeding on the belief that international trade will still further increase. It is a faith which has been courageously exercised during recent years, and it is already receiving some justification in the improved conditions which have already resulted. Those who .acquire Shipping shares at their present price are really banking on the preservation of peace and an expansion in international trade.

It should be unnecessary to emphasise the impossibility of forecasting future political developments, but this much can be said, namely, that, given a greater assurance of inter- national peace, a further recovery in international trade can be fairly confidently expected, and it is upon that increase that the future of the Shipping industry depends.

ARTHUR W. KIDDY.