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Lethbridge Herald Newspaper Archives

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Lethbridge Herald (Newspaper) - July 28, 1917, Lethbridge, Alberta SATURDAY, JULY 28, 1917 THE LETHBRIDGB DAILY HERALD PAGE SEVES Alleged Profits of The William Davies Company in Bacon, as Indicated by Department of L Five Cents per Pound, Unto: Actual Profits Two-Thirds of a Cent Per T HE statement issued by the Department of Labor concerning the business of The William ctin Davies Company Limited has been given widespread circulation throughout the country and provoked public unrest. Whatever the technical wording of the report was, the effect has been that the newspapers have published that "the profits on Bacon alone" of this Company "for 1916" were about "five millions of dollars." This interpretation ot the official report is not surprising in view of certain statements that the Commissioner of the Cost of Living makes. The Commissioner is reported as saying that "There were two individual cases of profiteering in 1916 and that had these cases occurred since the passage of the cost of living Order-1, he would consider it his duty to recommend that the facts be laid before the Attorney-General for consideration as to their criminality." The situation created by such erroneous and damaging, statements is serious as emanating from a Government official, from whom one looks for not only accurate statements but correct conclusions. The William Davies Company, being a private concern, has followed the practice of all private corporations, except when it made a bond issue in 1911, in that it has not published reports of its assets and liabilities or profit and loss. 1 he piesent circumstance, however, in which a Government Official has led the public to false conclusions, makes it advisable for this Company, for both the public interest and its own interest, to publish particulars of its business as well as point out the error of the statement of the Government Official. ' For the Inst fiscal year ending March 27th, 1917, The William Davies Company bought and killed 1,043,000 head of Live Stock (Cattle, Hogs and Sheep). This, plus purchases of outside Meats, produced 160,000,000 pounds of Meats. The Company handled 6,550,000 pounds of Butter and Cheese, 5,650,000 dozens of Eggs, and manufactured 26,500,000 tins' of Canned Goods. The net profits on these were .68 cents (or two-thirds of a cent) per pound on meats, 1.04 cents on Butter and Cheese, 1.04 cents per dozen on Eggs, and .47 cents (or slightly less than one-half a cent) per tin on Canned Goods. These profits include profits on all By-Products derived from these accounts. During the year the Company served at its retail stores 7,500,000 customers, the average purchase of each customer was 35c, and the net profit upon each sale was 5-8 of 1 cent. The turnover of the Company from all its operations for the last fiscal year ending March 27th, 1917, was $40,000,000. The net percentage of profit upon this turnover, after deducting war tax, was 1.69 per cent., or including war tax 3.45 per cent. The William Davies Company has assets of $13,385,000, of which $3,865,000 is tied up in fixed investments. To provide the necessary facilities for the increased volume of business the Company expended $750,000 in buildings and equipment during the year. Companies of other character present no more reasonable statement of profit and loss based upon the investments made in the business. The William Davies Company offered to the Imperial authorities, as well as to the War Office Service (which represents the Imperial authorities in Canada) to place the output of its Factory with respect to Bacon supplies, Canned Beef and Pork and Beans at the service of the authorities, on the basis of cost plus an agreed percentage. These offers were '-successively declined as the authorities evidently desired to purchase in the open market, and on this basis The William Davies Company has secured War Office business by open competition with the world. Respecting the Report of the Commissioner on the Cost of Living:- Last Winter the Commissioner, under authority of Order-in-Council, required packers to submit statements- under oath for some years back and up to December 1st, 1916, of incoming stocks of Meats and the cost of such, as well as statements of outgoing product and the selling value. This Company represented in writing at the time that the information as specifically required was not in accordance with Packing House Accounting methods, and invited the Commissioner to send an Officer to the Head Office of the Company to examine the books for any information desired, and to secure a viewpoint afe to the best way of collecting data which would be of use to the Government. This offer was declined, and there was nothing to do but fill in the information required as literally as we could determine it. For example, there was no recognition of the fact that a raw product may enter a factory under a specific classification and leave the factory as a finished product under some other classification. We submitted a series of accurate figures based upon our interpretation of the official requirements which made no provision for charges of any description other than incoming freight and unloading charges to be included in the cost or to be deducted from the selling price. There was nothing in tho report which could be read so as to determine a profit and loss statement. Tho very fact that with only a statement based upon cost of raw products and value of sales in Great Britain a Government Official has deduced "Large margins," "Profiteering" and "Criminality" if it had occurred since tho passago of a recent Act, shows too dangerous a trifling and incapacity to be permitted to deal with any important situation. Tho statements of this Company have been treated by the author of this report as if tho outgoing product was idontical with tho incoming product, and from the series of reports he has singled out two items-tho Bacon and Egg reports -and from them deduced an erroneous "margin" which the newspapers have interpreted as "profit." The author of the inquiry shows a strange lack of even a fundamental knowledge of simple bookkeeping and a dangerous inability to co-ordinate figures. The following are specific and outstanding errors in the report: The principal item that is causing excitement deals with cold storage Bacon. The term "cold-storage" is not defined, and the public is allowed to make its own definitions. As all Bacon in a packing house is under refrigeration it is really all cold-storage, and therefore this Company's figures of cold-storage Bacon represent the complete quantity of Bacon handled in its entire Plant, whether in freezers or in process of cure for immediate shipment. That some Companies interpreted cold-storage product as "freezer" product only is evidenced by the smallness or entire lack of figures on the Bacon list for some Plants, indicating that many Firms did not submit statements of their complete stocks, as did this Com-/ pany. An Official of this Company pointed out this cold-storage distinction to Mr. O'Connor and Miss McKcnna in Ottawa a few weeks ago, and the failure to make the distinction after having had it pointed out evidences lack of desire for accuracy of the real information desired. It iG true Tho William Davies Company, in 1916, exported 97,791,000 pounds of Bacon, but we do not know how the margin of 5.05 cents per pound is arrived at by Mr. O'Connor, as there were no figures to justify such ft conclusion. The probabilities are that the margin is arrived at by taking the average cost per pound of incoming product from tho average selling price per pound of outgoing product. This may be a rough way of estimating the gross margin when dealing with small figures, but when dealing with figures tho size that Mr. O'Connor has to deal with, a very small fraction of a cent per pound of error makes a very important difference in tho total, and one must be careful to make sure that the outgoing product is tho same finished merchandise of tha incoming product reported on. Allowing it to pass, however, as a rough esti- mate, we wish to point out-(first)-the inquiry of the Commissioner allowed only for incoming freight and unloading charges, and made no provision whatsoever for operating charges of any kind, such as labor, curing materials, refrigeration, et cetera. Such actual charges on the 97,-791,000 pounds exported were $1,162,000-or 1.2 cents per pound. This amount covered all charges up to the point of placing the Bacon on cars f.o.b. packing-house. In addition to this was the actual cost to land and sell this 97,791,000 pounds in England after leaving the packing house, which involved charges of 2.9 cents per pound-or $2,836,000. This 2.9 cents per pound included inland and ocean freight, landing charges, war and marine insurance, cables, and selling commission to agents. Tho ocean freight and war risk alono would make up 2.4 cents of the charge of 2.9 cents per pound. This 1.2 cents, plus 2.9 cents-a total of 4.1 cents-must be deducted from Mr. O'Connor's margin of 5.05 cents per pound, leaving a margin of .95 cents, or slightly less than a cent per pound, which still has to be reduced because of the error of premises and because of further factors which have to bo considered to determine net profits. It is quite evident some of the other packers did not show selling values in the country in which the goods were sold-a proceeding quite proper, as the forms submitted to be filled in were indefinite and ambiguous, thus permitting without charge of evasion a variety of interpretation as to the information required. It is thus possible that of all tho figures submitted by the different packers that no two sets of costs and sales prices are determined at the same common point. It is this difference of interpretation of what was required that accounts for the difference of the alleged "margin" made by the different compauies. Common conclusions, however, have been drawn by the author of the report from varying bases of premises. The figures of the Egg business were submit- ted on the same basis as Bacon, and similar deductions must be made. (Second)-The above margin is further reduced in that the author of this inquiry singled out the Bacon figures as an item in which the selling price shows an alleged improper advance  over cost, but he did not give us credit for the statements of other products, of which figures were submitted, the selling prices of which wero under cost. The reason of this was that through failure to inquire the Department entirely overlooked the fact that product may come in as pork and, through the process of manufacture, go out as Bacon, or, in another instance, enter tho factory as beef and go out in the form of canned meats; for example: much of the product which came in as pork, and which was entered on tho pork sheet submitted to the Commissioner-about which he makes no mention-was cured and left tho factory in the form of Bacon, and was, therefore, entered on the outgoing side of the Bacon sheet-the result is that tho Bacon sales are increased by this amount over the incoming stocks of Bacon, and, likewise, the sheet showing sales of pork is reduced by the amount that went out in the form of Bacon. If the Department takes one set of figures that show favorable to the Company they should take another set of figures that show unfavorable, as the principle in either case is the same, and failure to do so looks as if the author of the report was exercising more enthusiasm than sound judgment in his investigations. (Third)-It is queried in the report, that "if the margin of 3.47 cents," alleged to have been made in 1915, "was satisfactory, why was it necessary to show increased margin in 19167" Assuming again for the moment the soundness of the premises in asking such a question based on an erroneous "margin," it will be found that tho increased mnrgin is chiefly absorbed in increased ocean freight rates and war risk insurance in 1916, of which apparently the author of the report was in ignorance. The Company does not challenge either the legal or moral right of the Government to investigate business enterprises when public interest directs such an investigation should be made. If an investigation of the packing and meat business is ordered, the Company will place at the disposal of the Government not only the data it would be required to supply under Order-in-Council directing that inquiry be made, but will place the experience of its officers at the disposal of the investigating committee, if it is considered they can render any service which will be of value. The Company has not now-nor at any time during the fifty years of its operation-anything to conceal in method or practico of carrying on its business. It does, however, claim the right to conduct its export business without abusive comment from Government civil servants-especially when tho conclusions drawn from the data asked for are improper and false. One of Canada's chief export industries is the packing business. It is essential to the live stock industry, and, along with other export industries, it maintains the financial stability of this country and should, providing it is on a sound basis, receive encouragement and not slanderous abuse. In view of the publicity given to the report of the Commissioner ou the cost of living, the Company demands the same publicity in having an official Government investigation of this report to determine the truthfulness or untruthfulness of its conclusions. We do not seek publie consideration as a company, but we do say that untruthful official statements, or statements the effect of which is to create an untruh, adversely affect the live stock industry of this country, which is so valuable and essential a wealth-producing power and, in tho long run, are harmful to the very people that the statement seeks to benefit. If the passing out ofexistence of a corporation such as The William Davie* Company, or if nationalization of packing houses would materially and permanently reduce food prices, then in view of the present world tragedy it ought to be consummated without delay. The fact of the matter is, however, that with millions of people in Europe turning from producers into consumers bcoause of war, and the tremendous destruction of food products incident to war, there is no remedy for the high prices of food while such conditions last, except the remedy of thrift and increase of production. Long before there was talk of a Food Controller in tho United States or Canada The William Davies Company urged the Government at Ottawa, in writing, to appoint a Food Controller with full power to do what he saw fit, as we realized at that time the upward tendency in the price of food commodities unless cheeked by official effort. At the most a great deal cannot bo done in reducing food prices while currency is inflated and until the scale of prices of all kindB of commodities declines also. What can be done can only be done by a Food Controller. We wish to point out that nothing at all can be accomplished unless the data secured are accurately and clearly made and the deductions therefrom sound. Only public harm arises from dangerous incompetency in the haphazard oollectlon and careless use of important figures. As far a* The William Dariea Company it concerned this terminates all public statement* of the Company, and it will pay no more attention to speculative and haphazard statement! made either by newspapers or civil servants. The only further statement that will be made will be at an official investigation. Toronto, July 17t�^ ^917, E. C. FOX, General Manager THE WILLIAM DAVIES COMPANY, LIMITED t ;