PANY MEETING

DUNLOP RUBBER CO.

SATISFACTORY RESULT FOLLOWING RECENT IMPROVEMENT SIR J. GEORGE BEHARRELL'S REVIEW THE fortieth ordinary general meeting of the Dunlop Rubber Company, Limited, was held on April 4th at the Hotel Victoria, London, W.C.

Sir J. George Beharrell, D.S.O., the chairman, in the course of his speech said The report which your board has been able to make on the results of the year 1938 has, no doubt, been an agreeable surprise to you.

You will remember that when I addressed you last year I felt it necessary, in spite of the good showing of the year 1937, to sound a serious note of caution. I pointed out that though each month of the year had shown an improvement over the corre- sponding month of 1936, the rate of improvement had tended to decline, and that there had been quite a sharp fall in the last quarter. This tendency was reflected in a slowing down of our own business during the latter part of the year, and was accom- panied by a general fall in commodity prices, including rubber, which, on December 31st, 1937, had fallen to 7d. You will remem- ber that I warned you that if the price continued at that level the accounts of the Plantations Company would present an appearance very different from that shown in the report for 1937.

FALL IN PRICES These tendencies were continued during the first half of 1938. The price of rubber fell steadily till June, the average price for May being under 6d. All through the first half of the year the index figures for wholesale prices, imports, exports and industrial production steadily declined. Indeed, the rate of the decline in national production was of unprecedented severity.

Most serious of all from your company's point of view was the very heavy reduction in the output of motor vehicles, both here and overseas, which necessarily involved a heavy decline in the demand for tyres as original equipment.

These conditions were before your board when they came to consider at the end of September the results of the company's trading during the first six months of the year. The general results showed a serious falling-off when compared with the corre- sponding period of 1937. Nor was there much encouragement to be derived from a study of either the economic or political horizon, since the meeting of the board took place on the very day of the Munich Conference.

In these circumstances, the board, when considering the terms of their usual half-yearly statement to the Press, felt bound to strike a • note of warning, and you will recall that the statement which they issued referred to the fact that there had been a material reduction in the company's trading results and mentioned as the main causes the extremely unsettled conditions prevailing throughout the world, together with the restriction of the planta- tions' output and the heavy fall in the price of the crop.

In the second half, and especially in the last quarter of the year, a general and rapid improvement in the company's results took place. The reversal of fortune was so complete and so sudden as to be quite unforeseeable. Whereas the results of the first seven months showed a heavy decline from those of the same period in 1937, the total net profit for the whole year, as you will have seen from the report, was very little below the figure for 1937, which was, as you will remember, a year of excellent trade both for your company and for the country as a whole.

PROFITS AND DIVIDEND The aggregate total profits of the whole Dunlop group of com- panies in 1938 was £2,375,000, which was £129,000 less than the corresponding total in 1937. The total for 1937 of £2,504,000 was the highest for any of the past six years, the lowest corre- sponding figure being £1,869,000 for the year 1935.

There is included in the above aggregate the Dunlop Rubber Company's proportion of various items which do not represent normal earnings attributable to the current year, and this item, you will observe, has increased from L26,000 in 1937 to Li o,000 in 1938. This is due to the fact that these totals include the dividends and interest from subsidiaries situated in countries of which the economies are closely controlled, and to which I have already referred.

The net profit of the Dunlop Rubber Company for 1938 is £r.50r,000, and, adding the balance of £591,000 brought forward from last year, the total available for appropriation amounts to kz..092,000. The sum of £99,000 has been transferred to the general reserve, bringing the total up to £1,250,000 ; £175,000 has been transferred to the reserve for contingencies, bringing that reserve up to £I,213,000. After providing for the preference dividends, the board is enabled to recommend a dividend of 8 per cent. on the ordinary stock and a bonus of 1 per cent., and this dividend and bonus, if approved, will be paid on April 15th.

STRONG FINANCIAL POSITION I am sure you have all remarked the strong financial position. The total of surplus and reserves has risen from L4,347,000 at December 31st, 1933, to £5,7o6,000 at December 31st, 1938, repre- senting an increase in the five years of £1,359,000.

The result of this ploughing back of the profits is reflected in the surplus of current assets over current liabilities of the main company. This surplus has risen from £3,193,000 at Decem- ber 31st, 1933, to £4,603,000 at December 31st, 1938, representing an increase in the five years of £x,41o,o0o.

In this same period the surplus of current assets over current liabilities of the whole Dunlop group of companies has risen from £8,067,000 at December 31st, 1933, to LI0,2003000 at Decem- ber 31st, 1938, an increase of £2,133,000.

ACTIVITIES OF THE GROUP Chiefly owing to the lower average selling price of rubber dur- ing the year, the results of the Plantations Company showed a substantial decline, the decrease in net profit for the year being £32o,000. As a result, the dividend on the preference shares had to be paid by the Dunlop Rubber Company under its guarantee. The board of the Plantations Company, after very full con- sideration, has decided that the interests of the company will be best served by transferring the administration and control of the estates to Malaya, where the properties are situated. A new com- pany has, therefore, been registered in Malaya.

Turning to our tyre division. In replacement business the year proved a satisfactory one, and the faith in our new Fort tyre, ' The Tyre with Teeth," which I expressed to you last April, has been fully justified. Indeed, the unique principle embodied in this tyre has proved so successful that we are extending its use.

The expansion of the rearmament programme resulted in in- creased demands for our aeroplane equipment, and these will, no doubt, continue. We are making considerable developments in the use of rubber components, not only for road vehicles, but also for aircraft.

Our sales of rubber wings for motor vehicles, which are, you will remember, a comparatively recent development, continue to increase, and there is every indication that our success in the passenger 'bus field will be repeated in the goods vehicle market. The wing is flexible, weatherproof, and cannot corrode, so that it substantially reduces maintenance costs. Sales of Dunlopillo upholstery were well maintained.

The rubber products group again made a satisfactory showing in 1938, though the results of its different divisions varied in accordance with weather and other conditions.

OVERSEAS COMPANIES AND DIVISIONS The French Dunlop Company was able to make a small advance on its 1937 results. The business of the German companies con- tinued to make progress, and we were able to obtain payment of a slightly larger dividend than in 1937. In America business con- ditions during the first half of the year were very difficult and trading results of the American Dunlop Company were adversely affected. In the second half of the year, however, conditions rapidly im- proved, and the American Company made a profit in this latter period which was nearly sufficient to absorb the loss incurred in the first six months.

In Canada business generally declined, but the net sales of the Canadian Dunlop Company were well maintained and the final net profit slightly better. Our Japanese company has naturally been adversely affected by the unsettled conditions in the Far East. However, we have been able to obtain payment of a sub- stantial dividend in respect of 1937. Our assoaated company, the Dunlop Perdriau Rubber Company of Australia, almost exactly repeated the good results of the previous year. In Ireland the results for the year were satisfactory. The pro- ductive capacity of the South African factory continues to expand. In India, in spite of the repercussions of disturbed conditions in the Far East, the strong position of the Indian Dunlop Company has been well maintained, and I am glad to report an increase in net profits. In spite of difficulties, the export business remains quite profitable and its volume is being maintained.

PROSPECTS You will now wish me to say a few words about prospects. In the circumstances which, unfortunately, prevail, I am sure you will not expect me to speak very definitely. In passing, I might say that the total turnover of your company on re-armament work has only amounted to a very small proportion of our business, so that it will be 'realised that the closing of the re-armament pro- gramme would have a very slight effect on our results directly, but I am concerned about the possible effect on industry generally which would, of course, re-act on our business.

This re-armament expenditure must cease some time or other, although it is impossible at present to foresee the conditions under which it will cease. On the other hand, the uncertainties arising out of the political situation of Europe, which make the re-arma- ment programme necessary, are undoubtedly acting as a serious check to normal private enterprise. It seems to me that we are confronted with a situation which makes great caution necessary. In all the circumstances, notwithstanding the good results of 1938 and the stability which the conservative policy of your board has been able to give to your company's finances during recent years, your board feels, and I am sure you will agree, that we must maintain that conservative policy. The report and accounts were unanimously adopted.