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'i *- » A A ♦ â- â€¢. -M Ik. -*•â-  . <*â-  'i 1- .^,it- f-l -4 »( /*.. '^ V '^â- ^ .* IK â- 4 ^ ic . -. 4 A ». -» •- .J* 0. ft. 1* CANADA PACKERS LIMITED REPORT TO SHAREHOLDERS The twenty-first fiscal year of Canada Packers Limited closed March 31st, 194S. Dollar Sales, a new high, were $238,454,037 Tonnage, â€" weight of product sold, â€" was - 1,447,725,661 lbs. Net Profit, â€" after Depreciation, Taxes and Inventory Reserve, â€" (also a new high) $2,182,300 Net Profit in relation to Sales,â€" (C to A),â€" is 9/10 of 1 per cent. Net Profit in relation to Tonnage, â€" (C to B), â€" is 15c per 100 lbs., otherwise l/7c per lb. (A) (C) The following is a comparison of this year's Profit and Loss Statement with those of the two previous years. 1948 1947 1946 Dollar Sales $238,000,000 .$204,000,000 $209,000,000 Out of each Sales Dollar there was paid: â€" For Raw Materials,â€" chiefly Live Stock and other farm products 81.37c 80.21c 81.33c For Wages plus Salaries 8.48 9.10 8-06 For Services, â€" General Expenses 4.38 4.25 4.13 For Materials and Packages 3.12 4-06 3.76 For Taxes, â€" Municipal, Provincial, plus Federal 1.08 .98 1.48 For Inventory Reserve - .26 â€" â€" For Depreciation on Fixed Assets .42 .43 -40 99.11c 99.03c 99.16c Remainder, â€" Profit from Operations .89 .97 .84 Plus Income from Invest- ments, etc. .02 .04 -03 Total Net Profit for the year on each dollar of Sales .91c 1.01c .87c The products handled by the Company fall into four groups â€" viz. : â€" LIVE STOCK PRODUCTS, com- prising products derived from live animals : â€" Meats, â€" Beef, Veal, Pork, Lamb and Mutton ; By-Products, â€" Hides, Skins, Tal- low, Bones, Tankage, etc. Tonnage of this group - 467,879,272 lbs * Profit from this group $1,049,833 Profit per 100 lbs. - - - 22.4c OTHER FARM PRODUCTS, comprising, â€" Butter, Eggs, Cheese, Poultry, Fruits, Vegetables, etc. Tonnage of this group - 241,899,777 lbs. Profit from this group $644,013 Profit per 100 lbs. - - 26.6c NON-FARM PRODUCTS, comprising, â€" Edible Oils, Shortening, Soap, Fish, Fertilizers, Stock Foods, etc., Tonnage of this group - 658,548,607 lbs. Profit from this group $863,024 Profit per-lOO lbs. - - - 13.1c MANUFACTURING, comprising,â€" Canned Meats, Canned Fruits and Vegetables, and Frosted Foods. Tonnage of this group - 79,398,005 lbs. Profit ^avji this group - - - - $198,046 Profit per 100 lbs. - - 24.9c Profit from the four groups $2,754,916 Profit on Group No. 2 includes an unusual profit on Storage Butter, viz. 625,968 This item has been set up in toto as an inventory reserve. Net Profit after setting up this inventory reserve,.. - $2,128,948 Profit from Investments ------- 53,352 Total Net Profit $2,182,300 The outstanding feature of the year was the spectacular advance in the price> of all loods, especially live stock and live stock products. The measure of these advances is shown in the following table which sets up average prices of foods in Canada (in each case the average for the month of July) for the following periods : â€" (1) The six pre-war years, 1934/39 (2) The six war years, 1940/45 (3) The three years since the war, â€" 1946, 1947, 1948, Good Steers, live, Toronto, per lb. Hogs. B-1 dressed, Toronto, per lb. Lambs, live, Toronto, per lb. - - - - Eggs, 'A' large. Tor- onto, per doz. Creamery Butter, Tor- onto, per lb. Cheese, f.o.b. Factory, Ontario, per lb. Vegetable Oil, refined, Toronto, per lb. Wheat, No- 1 North- ern, Fort William, per bushel Oats, Nq. 2 C.W., Fort William, per bushel Barley. No. 1 Feed, Fort William, per bushel Average July price 1934-39 Average July price 1940-45 July 1946 July 1947 a 6.07c 10.70c 13.22c 14.47c 21.01c 13.20 16.65 21.87 22.98 31.88 9.55 14.84 16.91 17.21 22.75 23.75 34.50 46.00 39.75 5200 21.12 35.60 47.90 50.50 67.37 12.60 20.50 26.00 28.00 33.87 6.90 14.65 16.40 41.10 30.50 92.75 97.75 135.00 155.00 155.00 - 42.37 31.12 61.50- • 65.00 88.25 - 46.00- * 63.75 84.75 93.00 120.50 NOTE: On certain products .subsidies have been paid by Gov- ernuiMits,râ€" Federal and Provincial, The prices appear- ing gJiOve include all subsidies, except in the case of \yi><4t which is shown at Board price. The Wheat . -Board will make a participation payment (the amount /* of which is not now known) covering tlie five crop years end' ig July 1950. As between July 1939 and July 1948, the live stock products' listed in the above table show the following percentages of advance: â€" Steers - - -' - 223% Eggs 62% Hogs ----- 157% Creamery Butter - 217% Lambs - - - - 123% Cheese - - - - 151% In conlra.st to the above, the average advance of all wholesalt prices from July 1939 to July 1948 is 110%. It must be remembered that in 1939 live stock prices were low in relation to other products. It was to be expected that the advance in live stock products would be greater than the aver- age for all prodncts. Nevertheless, the phenomenal advances recorded above inevitably give ri.se to the following queries : â€" 1. Is the iiresent level of live stock prices likely to be maintained? NOTE: If the embargo on shipments to the United States is lifted, the immediate prospfct is for still higher prices.* 2. If, finally, there is to he a recession, will that recession be gradual or 'vertical'? NOTE: FnllowiMg \\'orld \\':ir I, prices continued to advance for a period of eighteen months after Armistice Day (Novemlier 1918 to July 1920). Tlien a violent collapse of prices set in. 3. If and when the decline comes, at what (approximate) level are prices likely to be ultimately stabilized? NOTE: .\.t least one prediction seems safe, â€" viz. that prices of live stock products will not again sink to the levels of the 1930's. This for two reasons: â€" j (a) that prices in the 1930's were abnormally low; ' (b) that the post-war dollar is equivalent to pre-war 50-60c. All three of the above questions are of the utmost importance to live stock producers and processors. But, â€" except for the inserted notes, â€" no one as yet has the answers. At the present time, complicated and unpredictable political factors seem to count almost as iicavily as the purely economic eleinents of the problem. One fundamental factor at some titiie will come into play. The world's food is produced from year to year. At any one time, whether food supplies are sufficient depends upon the last crop. In a period of short supply, people go hungry. But if a bountiful crop follows, the hunger does not carry over. After a few days (possibly weeks) of heavy eating, famished appetites are re- duced to normal appetites. Th6n the increased food supply will tend to bring prices back to normal (that is, normal as esta- blished by the new conditioiis). The crop now being harvested in the Northern Hemisphere is a bountiful (perhaps a record) one. This may prove to be the year when mounting food prices will turn downward. Mention has already been made that net profit was the highest in the Company's history. The record profit of the year is accounted for by the record advance in price (within the year) of most of the products handled by the Company. In addition to the normal operating profit an 'inventory' profit accrued from the advancing prices- 2. 3. On January 2nd, 1948, the Cana 'i.Ja Meat Board announced an advance in the contract price of Wiltshire Bacon (to U.K.) of 7c per lb. This advance was immediately reflected in corres- ponding advances in the price of Hogs and of domestic Pork products. These advances (in domestic Pork products) led to widespread protests from housewives' associations, which in turn led to the appointment of a Select Committee of the House of Com- mons, enjoined to examine into the causes o^he advancing cost of living. The extent to which packinghouse costs, and particularly pack- inghouse profits, enter into these advancing food prices was a natural subject of investigation by this Committee- Packers were asked for voluminous reports covering oi)erations of the Industry over a period of thirteen years. The scope of .the present Report does not permit a lengthy analysis of the data submitted, but the essenial facts revealed may be summarized as follows: â€" 1. That over a period of thirteen years (1936 to 1948, inclu- sive) the average net profit of the Packing Industry was 1/7 of Ic per lb. of product sold. That the highest profit in any one year was 1/5 of Ic per lb. of product sold. That in the rapidly advancing costs of meat, packinghouse profits have pla>ed no part. Within the three-year period 1946 to 1948, the retail price of major Beef cuts advanced approximately 20c per lb., and Pork cuts approximately l9c per lb., whereas packinghouse profits in the same three years had been respectively l/12c, l/7c and l/7c per Ib.t If the Packing Industry had made no profit whatever, the relief to the consumer could not have been noticed. The advance in meat prices was due entirely to advancing costs of live stock. These advances were brought about by conditions of supply and demand. Packers do not and can not influence either supply or demand, and therefore have no ])art in determining the general level of live stock prices. For instance, during the depression of the* early 1930's, packers could do nothing to advance prices- They were able to pay for the live stock only what they were able to get back for the meats (and by-products). Conversely, at the present time packers can do nothing to alleviate the high costs of meats, which are due to a world shortage of all foods, especially live stock. The operations of the Packing Industry, both in buying and selling, are carried on under conditions of keen and constant competition. The live stock which is the packer's raw material is pur- chased upon the various markets throughout Canada. On each market numerous packer buyers compete for the live stock. The producer is represented by a commission man. The commission tnan is an expert judge of live stock, and his job is to get the highest possible price for the animals consigned to him for sale. That he is competent to do this is evidenced by the speed at which prices are forced up when supplies are short of demand. (Example, â€" Within a period of four weeks, â€" between May 8th and June 8th, 1948, â€" the price of Cattle in Canada was forced up 4 to $ cents per lb.) After processing the live stock, the packer sells the meats to the retail butcher. Here again the transaction is one in which the keenest competition prevails. Each retailer is called upon each week by many packer salesmen, and the retailer naturally trades down each salesman against the others. In the end the retailer divides his order amongst several salesmen, selecting from each those products for which his prices are lowest, value considered- The fact is not p;enerally realized that there are no esta- blished prices either for live stock or for meats. Each purchase and each sale is a separate 'bargain', â€" in which the buyer and seller compete, the one to reduce the price a fraction, .".nd the other to advance it a fraction. It is this keen and continuous 'bargaining' Avhich explains *Tlie report was in the printer's hands before the embargo was lifted. tThe figures quoted are from the submission of Canada Packert, 6. the small percentage of prolit upon which the indubi; > u carried on. This small percentage upon sales, however, does not mean that the Industry is necessarily unprofitable. In the year under review, capital was turned over approx- imately eight times, so that a profit of .91 per cent on sales yielded a return of aproximately IZ per cent ui)on capital. However, the small margin of profit does enforce effici- ency. While a profit of 1 per cent on sales yields an ade- quate return on capital, a loss of 1 per cent, if continued, means ruin. The record of the Packing Industry in Canada is strewn with the wrecks of companies whicii failed to keep pace with competitors, bv this narrow margin. LABOUR RELATIONS In spite of the fact that a strike, lasting six weeks, occurred within the year under review, Directors are pleased to report that in the main relations with Employees are cordial and co- operative. The Comi)any Officers feel that the strike was the result of an unwise method of negotiation (on the part of the Union) which had been followed for four successive years. That method was the introduction of a strike threat at an early stage each time a new agreement was under negotiation. This comment is made, not by way of recrimination, but solely in the hope that a better method may be permanently established. Dis- cussions with the Union are at point of completion as this Re- port is being written, and there are good reasons to believe that foundations of such a method have been laid. In the discussions, an increase of 9.6% in wage rates has bet-n agreed upon. No ab.solute standard has been devised by which to deteimine just what wage rates should be in any industry. I>ut two criteria are commonly used : â€" 1. How do increas^ in wage rates compare with increases in living costs? 2 How do present rates compare with present rates in other industries? The following tables apply these criteria to the rates of Canada Packers : â€" 1. Comparison with Increased Living Costs Present rates (including the increase of 9.6 per cent) and those of 1939 are as follows : â€" Percentage 1939 1948 Increase 55.7% 25% 2. Average rate, men - - 50.8c 10S.4c 113.8% Average rate, women - 32.8 81.2 147.6' <> Combined average rate - 48.1 103.4 115.0% In August 1939, the Dominion Cost of Living Indsx stood at 100.8. It now stands (July 1948) at 1569, an increase of 56.1 points, or - - The increase in rates is thus more than double the increase in the Cost of Living. However, this excess percentage (wages over cost of living) does not represent an equivalent in- crease in purchasing power. Corrections must be made for advanced Income Tax rates (modified by Family Allowance payments) and for consid- erably shorter working hours. When all correc- tions are made, the increase in actual purchasing power of all hourly rated employees of the Com- pany works out at an average of at least Comparison with Rates Paid in Other Industries. Comparison of packinghouse average rates with those of Canadian Industry generally is possible by reference to a report published monthly by the Dominion Bureau of Sta- tistics.''' That report includes wages of men and women, up to and including foremen. Besides regular earnings, it includes such additional income as overtime premiuius, night work premiums, and incentive bonuses. By this standard Canada Packers' average rate (including the 9.6 per cent increase just granted) compares with others as follows: â€" Canada Packers Limited - - $1,101 per hour Meat Industry (as a whole) - .954 " " All Manufacturing - - - .906 " " Canada Packers' rate is thus higher than : The Meat Industry (as a whole) by The average of All Manufacturing in Canada by 21.1% 15.4% During the year a plan has been worked out between the Com- pany and Employees whereby through joint contribution, com- prehensive protection in time of illness is provided. The pro- tection include,s : â€" Medical attention and medicines ; Hospitalization for Employees and their dependents; Surgical expenses up to $200.00; Funeral Benefit of $100.00; AVeekly Indemnities in sickness of $21.00 for men and $16.00 for women, continuing according to length of service up to 52 weeks. A Group Life Insurance Plan to which the Company contributes has been in effect since 1940. Each Employee irrespective of age can insure for $2,000 for a premium of $5.20 per $1,(XX) per year. For male Employees this Insurance is compulsory, â€" for females, optional. PROFIT SHARING Canada Packers was formed in 1927. For eight years no dividends were paid on the Common Shares. In 1935, dividends on the Common Shares were begun. In the same year the profit-sharing plan of the Company was initiated. The policy of the Company is to maintain regular salaries and wages at a level equivalent to the highest paid elsewhere in the Industry. If profits permit, a further payment, by way of bonus, is made to each Employee at the end of the fiscal }ear. The profit-sharing plan is not contractual. The sum to be paid in bonuses is determined by the Directors, and is based upon the earnings of the Company for the year. This year, in view of the record profits, a record sum was allot- ted,â€" viz. $1,500,000. Distribution of profits for the year under review has been as follows : â€" Net Profit before bonus was - - . . $3,682,300 Paid to Employees, as bonus - . - 1,5(X),(X)0 Net Profit available for Shareholders - $2,182,300 Reminder : This sum is equivalent to 9/10 of 1 per cent of sales 1/7 cent i)er lb. of product sold. Out of this sum there was paid to Shareholders as dividends $1,000,000 The remainder was added to Reserves - $1,182,300 Since the adoption of the profit-sharing plan (1935). distribution of profits as between Shareholders and Employees has been as follows : â€" To Employees, as bonuses - - - $10,410,000 To Sliiireholders, as dividends - - . 10,550.000 J. s. McLean, President. Toronto. August 12th, 1948. ♦"Statistics of .\verage Hours Worked and Average Hourly Earnings'* NOTE: Extra copies of this report are available and so long as they Uat will be mailed to anyone requesting them. Addreu to Canada Packers Limited, Toronto 9, ?