FINANCE AND INVESTMENT
By CUSTOS
THESE are trying days for investors. One by one industrial reports are confirming the impression that sellers' markets are dis- appearing and buyers' markets—which mean reduced profit margins—are taking their place. It is this conviction that explains—much more than the threatened Excess Profits Levy and higher distributed Profits Tax—the weakness of industrial equity shares. On top of this we have the renewed fall in the pound in the foreign exchange market, which tells its own story of a suddzn recrudescence of fears that Mr. Butler's heroic measures may, after all, prove unequal to the task and need to be reinforced when the real show-down comes in the autumn months. While I am prepared to admit that at the current level of gilt-edged and equity prices a good deal of trouble ahead has already been discounted, 1 am not yet disposed to say this is the right time to buy, except for those who are not worried by day-to-day fluctuations and who take an essentially long-term view. There should be better buying opportunities in the general run of investments before real recovery sets in.
Anglo-Iranian Profits Ordinary stockholders in the Anglo- Iranian Oil Company should not be dis- appointed at the preliminary figures now announced for 1951. • The fall in gross profits from £115,661,714 to £75,899,965 is substantial, but certainly no more so than should have been expected from the loss of income from the company's investment in Persia during the second half of the year. Supplies from Abadan ceased completely towards the end of June and, as stockholders had been warned, the new situation involved heavy outlays on re-routing the tanker fleet and on other readjustments such as the pur- chasing of oil from non-Persian sources. In all the circumstances earnings of about two- thirds of the profits of 1950—the company's most prosperous year on record—must surely be judged a satisfactory achievement. Last November the Anglo-Iranian chairman forecast that unless there was some wholly unforeseen happening in the remaining few weeks of the year the company would be able to maintain the 30 per cent. dividend which had been forthcoming for some years past. This forecast is now fulfilled by the payment of a final dividend of 25. per cent., which brings up the total to 30 per cent. for 1951. What is most reassuring is that the net profits, which work out at £24,233,100, against £33,102,600, cover the dividend about seven times over. Moreover, the group earnings have again been arrived at after charging royalty on the basis of the 1933 Convention with Iran and setting aside a sum to the credit of the special contin-
gencies account. For 1951 the royalty charge has been limited to £8,326,446 and the contingencies provision to £9,500,000, compared with an aggregate of just over £32,500,000 in 1950, when the company was still in possession of its properties in Persia. Last year gross earnings had the benefit of
exceptionally favourable trading conditions during the first six months. In assessing the outlook for 1952 one is entitled to expect that the ,exceptional expenditure involved in the latter part of last year in re-routing the tanker fleet and buying substitute suppiles will be greatly diminished, while earnings will also get the benefit of the rapid growth of production from Kuwait and other areas. One gets the general impression that, leaving out of account any possibility of the com- pany regaining possession of Abadan, the 30 per cent. dividend should again be com- fortably covered. Since the preliminary announcement Anglo-Iranian £1 Ordinary units have fallen by several shillings to £5,5,. At this level they give a yield of over 5f per cent., and in my view are attractive for long-term holding.
Canadian Eagle Results
City expectations that Canadian Eagle Oil, who are closely associated with the Shell group, would announce higher profits and an increased dividend for 1951 have now been fulfilled. Consolidated net profit has jumped from £3,161,825 to £6,030,211, and was struck after charging £3,285,174 for U.K. taxation, against £1,898,178 in 1950. If one adds back the taxation charge it becomes apparent that gross profits, before tax, must have risen from approximately £5 million to £9,300,000. This company's business falls into three main divisions—the exploration, production and purchase of oil ; the shipping and marketing of oil and petroleum products, and investments in allied oil marketing companies. On every side earnings must have benefited from last year's favourable conditions, and especially from the high level of tanker freight rates. In dealing with available earnings the Canadian Eagle directors have followed a cautious line, in that they have increased the transfer to exploration and general reserve from £2,650,000 to the formidable figure of
£5,350,000. The Ordinary dividend is raised from 10fd. to ls. 1 fd. a share, and the carry-forward is reduced from £794,855 to £63,471. Of the Ordinary payment of ls. 10. a larger proportion (44/100th) is subject to tax than last year, when 71/100th of the smaller dividend of 101d. was given tax relief. From this one may draw the con- clusion that the Eagle Oil and Shipping subsidiary, which is registered in the U.K., has contributed proportionately more/to the 1951 dividend. On a grossed-up basis the latest payment works out at approximately ls. 8fd., which compares with a gross ls. 5fd. for 1950. Following the results Canadian Eagle have fallen from 31s. 6d. to 29s. 6d., a measure not of any disappoint- ment with the results but of disappointed hopes that an even larger dividend might have been forthcoming. The yield at the present price is about 5f per cent., which certainly does not compare favourably with the 6 per cent, which can be obtained from " Shell." On the other hand, there have been suggestions that the important Eagle Oil and Shipping subsidiary might move its domicile from the United Kingdom, thus effecting a substantial tax saving. So far, no confirmation of any such intention has been forthcoming, but City hopes in this direction have not been abandoned.
" Blue Circle " Cement Progress
In happy contrast with most sections of British industry, which are now running into buyers' markets, the cement trade is still encountering strong demand for its products both at home and overseas. This emerges quite clearly from the latest annual reports of the " Blue Circle " group. In his state- ment accompanying the accounts of Associ- ated Portland, the parent concern, Mr. George F. Earle discloses that so far this year deliveries of cement are about. 250,000 tons above those of the corresponding period of 1951, and that the percentage increase in deliveries is considerably greater in the export than in the home market. This year's problems are, therefore, likely to be concerned more with production than with sales. To meet increasing demands the group is concentrating on extending and improving the efficiency of its existing works rather than building completely new works in this country. Abroad it has expansion plans • in hand in New Zealand, Australia, South Africa, Nigeria, Malaya, Mexico and British Columbia. It is a remarkable fact that up to the present, thanks to the generous ploughing back of earnings into the business, the " Blue Circle " group has been able to finance all its schemes from its own resources, as well as meet a heavy and increasing taxation bill. Neverthe- less, Mr. Earle gives a timely warning that with the existing high taxation and high building costs this will become impossible unless some tax relief is forthcoming. For 1951 Associated Portland maintained its 27i per cent. Ordinary dividend, while at the same time making large provisions for depreciation and plant and machinery replacement. At 95s. 3d. the £1 ordinary units offer 5f per cent. ,They look to me a very sound holding.
British Celanese Setback
Everyone is now prepared for some dis- appointing results from textile companies. The decision of the British Celanese board to reduce the interim on account of the year which ends in June to 44 per cent. has, nevertheless, come as an unpleasant sur- prise. Everyone assumed when the new share issue was made in November that the annual dividend rate which the board had in mind was 16 per cent., and, although con- ditions in the rayon trade are known to have undergone a sharp change for the worse, it had been hoped, in view of the ample cover behind the dividend, that the rate might be maintained. In announcing the cut the board call attention to " the severe depres- sion in the textile industry," and they warn stockholders that the final dividend norm- ally announced in the autumn must be sub- ject to a review of the full results for the year and to general business conditions. It would appear, therefore, that stockholders must be prepared for a reduced final, and it would seem a reasonable guess that the total for the year might be something between 10 per cent. and 124 per cent. This guess is based on an assumption that the tide will not have turned in the textile trade in time to influence the autumn decision. Meantime, British Celanese 10s. Ordinary units, of which a new issue was made less than six months ago at 30s., are now down to 20s. 3d. From the,long-term standpoint they look decidedly tempting, but I doubt whether there need be any hurry to buy.
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