The voice of B.C.'s organized fishing industry workers
NOT POOR NOW. MUCH RICHER LATER
BCP poised for surging profits
WHILE fishermen fight foreclosures and shoreworkers and tendermen eke out unemployment insurance benefits, B.C. Packers is quietly spending its way to complete domination of the B.C. fishing industry. Backed by the massive financial strength of the George Weston group that owns it, B.C. Packers is using its own financial resources, adding a healthy injection of government funds, and readying for a new era of massive profits.
The 1981 profits of $1.3 million announced last week look poor when compared to the banner year of 1978, when BCP salted away $12.5 million in net earnings. But the latest figures are well above last year's token surplus of $140,000 and confirm that Weston's plan for conquest is working well.
Only the bargaining strength of fishermen, tendermen and shoreworkers stands in the way of a breakthrough.
"Minimum prices for net-caught herring and salmon and wage rates must be negotiated before these seasons commence," writes BCP chairman Richie Nelson in his 1982 forecast. "No serious interruption to operations is foreseen at this time, providing that the realities of costs and markets are recognized and expectations are restrained." All in all, he says, "1982 will be another difficult year."
Industry workers would like to have Nelson's kind of problems. A close study of the financial statements released last week show a company freely spending to consolidate and expand its influence while mercilessly slashing away unprofitable parts of its operation on which industry workers rely.
In the two years 1980 and 1981 combined, BCP incurred long-term debt of $34.1 million. In the same period it retired $5.8 million in long-term debt and added $37.8 million to its fixed assets. In other words, its assets increased about $10 million in the same period. Part of this money came from the $8 million sale of BCP's Saskatchewan rapeseed plant, which generated a profit of $3 million.
Gains on the sales of other assets have been equally impressive. Fixed assets sold in 1981 for $3.9 million — the St. Mungo plant among others — generated a $2.3 million profit. And the auction has just begun.
Nelson spelled out Weston's long-term plan in his 1980 address to shareholders, just weeks after closing a deal to purchase most of Canadian Fishing Co. for what American news reports said was U.S.$15 million.
"As a consequence of the loss of the roe fishery and marketing difficulties the industry has found itself in a financial crisis," Nelson said, "the fourth since the turn of the century. These crises ... have been resolved by a series of mergers and amalgamations. B.C. Packers has participated in these rationalizations since 1902 and in each case has emerged as a stronger company."
The company's scheme was a simple one developed by the Weston empire in a decade of drastic and profitable restructuring. Galen Weston, the empire's president and a BCP director, pioneered the technique when he started his own chain of supermarkets in Ireland at the age of 20 with his personal funds. In a matter of years, he was rebuilding Weston's British interests and by 1975 he was in charge of the multi-billion dollar conglomerate.
Weston brought his father's firm back from the brink of financial collapse by what he termed "boiling the business down." Richard Currie, who also now serves on the BCP board, was more colorful in his description of a similar operation on Weston's Loblaws operation, which went from a $4 million loss to a $16 million profit in four years.
The company concentrated on "moving out redundant assets of all kinds," Currie says, "fixed assets, balance sheet assets or people." They were purely economic decisions, he says, as practical as "a doctor's decision to amputate a gangrenous arm."
According to writer Alexander Ross, who profiled the Weston rulers in Canadian Business in March, 1981, the firm's goal is to balance low profits in food processing with high profits in distribution.
Thus Currie, who heads Weston's distribution arm, sits on BCP's board, as does
Jay Cates photo
Heavy Investment such as that to consolidate operations In Prince Rupert (above) Is consistent with the philosophy of Weston helmsman Galen Weston (left) and his lieutenants Bruce Buchanan and Richie Nelson (below), posing with symbolic government llferlng.
financial expert Mark Hoffman and Weston director Simon Reisman, a former deputy finance minister who undoubtedly offers important connections to the Liberal government.
Although BCP makes much of its current debt load, it admits it "participates in a central (Weston) cash management system which has the effect of reducing financing costs." In fact, the BCP debt is a small fraction of Weston's long-term debt of $248.8 million in 1980.
For the Weston empire as a whole, Galen Weston's hard-nosed approach is paying off in profits that are rising faster than sales. Profits for 1981 were $79.1 million, up from $70.4million in 1980. Sales of $7.4 billion were far ahead of the $6.8 billion in revenues in 1980, which made Weston the third-largest corporation in Canada ahead of monsters like Ford, Imperial Oil and Alcan.
In BCP's case, the Weston philosophy is being followed to the letter. The apparently depressed profits actually reflect steady investment in consolidated economic power.
The main investments this year in B.C.
are the $9 million Oceanside consolidation in Prince Rupert and the new reduction plant at Imperial in Steveston. The company's partially-owned tuna cannery in the Philippines is coming into production. Acquisition of a new seine fleet is complete. A small cannery has just been acquired in Petersburg, Alaska, and is to be outfitted with a high-speed one-pound canning line.
The company's major real estate development in Steveston is ready for municipal approval.
At the same time, BCP is cutting away the "gangrenous arms" — mostly people — that are cutting into profit:
• real estate holdings, which jumped from $1.7 million in 1979 to more than $10 million today, are being turned into a major housing project in Steveston;
• the 287-vessel rental gillnet fleet has been sold to three tribal councils, who also are spending government money. The deal will net between $6 million and $8 million and affect several hundred fishermen;
• consolidation of Prince Rupert operations, with elimination of the large Port
Edward cannery and several other smaller plants and boatyards will eliminate the jobs of several hundred shore-workers, many from Indian communities; and
• the sale of BCP's coastwide network of floats, harbor facilities and unloading stations, including the old cannery at Namu, are to be sold to the federal government in a multi-million dollar deal that will affect fishermen and cost more shore jobs.
Despite erratic profits since 1978, BCP's sales have risen steadily, hitting a record $301 million in 1981, almost 50 percent above the 1977 level of $213 million. Assets have climbed to $119 million from $82 million in the same period, with debt rising to $86.9 million from $46.1 million.
The company undoubtedly wants to close the gillnet deal as soon as possible. It has $15 million in debt outstanding at a rate of 11% percent. After June, 1982, the rate jumps to prime. An injection of government cash before then would be most timely.
Thanks to the 1980 crisis, BCP is completely dominant in salmon canning and holds a strong edge in frozen markets. It can rely on Weston for cheap financing. It has a willing buyer in the form of the federal government for assets it long since depreciated to nothing. (Depreciation rates run from 2.5 percent to 25 percent a year.)
Although the company claims an operating loss of almost $11 million in 1980 and 1981, deferred taxes totalled $8.5 million. Although Nelson apologizes for dividends to shareholders of only $226,000 in 1981 — "a grossly inadequate return considering the magnitude of the investment and the risky nature of the business" — his fellow directors probably are not complaining.
A small note in the 1979 report showed the top 17 officers of BCP were paid a total of $1,281,075 in that year, not including stock options.
That's an average $75,357 each. Granting them a modest 10 percent increase in 1980 puts them at about $82,893 in that grim year of crisis, and a further 10 percent increase in 1981 puts them over the $91,000 mark and within striking range of the magic $100,000 in 1982.
Evidently the talk of restraint does not apply to the executive suite, where Weston executives are laying the groundwork for a decade of record profits generated by B.C. fishermen, shoreworkers and tender-
THE FISHERMAN — MARCH 26, 1982/5
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