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CUBAN GANE PRODUCTS CO., Inc.
annual report 1931
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1931
CUBAN CANE PRODUCTS CO., INC.
63 WALL STREET NEW YORK
December 24, 1931.
To the Stockholders :
Your Board of Directors submits herewith the annual report for the year ended September 30, 1931, together with Consolidated Balance Sheet of Cuban Cane Products Co., Inc., and its wholly owned subsidiary, the Eastern Cuba Sugar Corporation, as of that date.
There are also submitted Consolidated Statements of Profit and Loss and Surpluses of the same corporations.
The Profit and Loss statement shows an operating loss of $863,838.01 after valuing sugars on hand September 30, 1931, as stated in the Balance Sheet, as compared with an operating loss of $1,617,933.48 incurred the previous year and, after interest charges, taxes, etc., but excluding depreciation, a total loss of $1,413,366.23, as compared with $1,936,465.28 the previous year. Corresponding figures (except as noted) have been as follows for the past five years:
Bond & Other Operating Interest, and
Profit Charges Depreciation Not Profit
1930-31........ $863,838.01f $549,528.22* .......... $l,413,366.23t
1929-30........ l,617,933.48t 715,836.18 $778,005.25 3,111,774.91+
1928-29........ 3,649,435.44 2,705,267.14 1,750,000.00 805,831,70+
1927-28........ 4,366,554.50 2,402,285.31 1,750,000.00 214,269.19
1926-27........ 5,275,599.30 2,583,472.34 1,750,000.00 942,126.96
t Loss.
* Does not include bond interest paid or accrued, for year ended September 30, 1931.
The loss for the year resulted from the fact that during the period in which all but a relatively small proportion of the sugar we produced was being sold, Cuban raw sugar sold at a lower average price than ever before in the history of the industry. The cost of production of our sugars was 1.453 cents per pound f. o. b. Cuban ports, the lowest cost ever recorded by us. At the date of this report substantially all our 1931 sugar has been sold, and the average price realized, adjusted to give effect to sales since September 30, 1931, is 1.232 cents per pound f. o. b. Cuban ports.
The President of Cuba, by virtue of authority vested in him according to the Sugar Stabilization Law of November 15, 1930, restricted the total Cuban 1930-31 Crop to 3,122,000 tons. Notwithstanding the fact that your Corporation's production of sugar was, by this restrictive action, reduced from 3,251,362 bags in 1929-30 to 2,308,886 bags in 1930-31, a reduction of 29%, the cost per pound of the sugar made was substantially below the cost of the previous year. Our cane cost was less, as is shown in the following comparative tabulation, and vigorous economy measures made it possible for us to reduce manufacturing and delivering costs, while still absorbing all overhead items directly chargeable to costs.
1930-31. 1929-30. 1928-29. 1927-28. 1926-27.
Cost of
Cost of Manufacturing Total Cost Sale Price
Cane and Delivering f.o.b. Cuba f.o.b. Cuba
.529^ .924$! 1.453$! 1.232^
.617 .967 1.584 1.309
.794 .870 1.664 1.832
1.156 .993 2.149 2.470
1.415 1.078 2.493 2.843
The foregoing comparison of average sale prices has to do with sales of raw sugar only. In addition to the income from sugar, your Corporation received
during the fiscal year ended September 30, 1931, $189,274.62 net proceeds from sales of molasses and $232,514.66 from miscellaneous sources, as compared with $1,412,483.26 from molasses and $186,328.33 from miscellaneous sources the previous year. This additional income, if applied to our 1931 average sale price f. o. b. Cuba, would increase such average from 1.232 cents per pound as shown in the foregoing, to 1.288 cents per pound.
The total production of sugar (in bags of 325 pounds), has been as follows during the past five crops:
Total
Our Cuban
Production Production Our %
1930-31........ 2,308,886 21,519,067 10.7
1929-30........ 3,251,362 32,195,761 10.1
1928-29........ 3,965,275 35,538,909 11.2
1927-28........ 3,232,007 27,829,987 11.6
1926-27........ 3,425,904 31,074,162 11.0
The National Sugar Export Corporation of Cuba, a corporation organized in Cuba under the Sugar Stabilization Law dated November 15, 1930, for the purpose of acquiring and selling, in an orderly manner and over a five-year period, 1,500,000 tons of Cuban raw sugar, finally fixed your Corporation's proportion at 913,105 bags of 325 pounds. Of this quantity, 653,326 bags had been acquired from us at the time of our last Annual Report. The balance of 259,779 bags, which included 23,271 bags delivered for account of colonos, was acquired during the fiscal year under review.
For this sugar acquired by the National Sugar Export Corporation we have received Cuban Government Sl/2% Bonds at the rate of $4.00 per bag of sugar f. o. b. Cuban ports aggregating in amount $2,908,440.00 par value, and shall be entitled to receive $618,700.00 additional amount of bonds as sugar now held in our warehouses, is delivered by us f. o. b. Cuban ports, and when balances retained for final determination of weights and polarizations are liquidated.
Since September 30, 1931, the National Sugar Export Corporation has redeemed from us $414,800.00 of the above mentioned bonds at par plus interest to November 21, 1931, and the cash received has been applied to reduction of our bank loans secured by such bonds.
The average percentage of weight of sugar produced to weight of cane ground in our mills has been as follows for the past five years:
1930-31 1929-30 1928-29 1927-28 1926-27
12.83% 12.39% 12.23% 11.56% 11.23%
The average efficiency of our sugar mills is reflected in the following comparison of losses in manufacturing:
1930-31 1929-30 1928-29 1927-28 1926-27
1.54% 1.54% 1.80% 1.91% 1.81%
Your Corporation owns in fee 472,660 acres of land, and holds under lease 298,365 acres. Total lands owned and leased are therefore 771,025 acres. It owns and operates for the transportation of its cane, products and supplies 983 miles of railroad, of which 799 miles are standard gauge and 184 miles narrow gauge; together with equipment consisting of 137 locomotives and 3,802 cane and other cars.
On February 16, 1930 your Corporation took over from the predecessor company, Cuba Cane Sugar Corporation, the assets of the predecessor company. Properties owned were set up in the Balance Sheet of the new Corporation at $19,839,-803.81, a reduction of $44,257,594.80 from the sum of $64,097,398.61, at which the properties had stood on the books of the predecessor company. Since the time of its incorporation, the new Corporation has had to contend with a highly demoralized sugar market as indicated previously in this report, and under these circumstances, your Directors feel that nothing can be gained either in the interest of the security
2
holders of the Corporation, or of the Corporation itself, in endeavoring now to re-value the properties owned by the Corporation or its colono accounts receivable. Either the sugar industry in Cuba can become prosperous and succeed through stabilization of world raw sugar prices on a reasonable and normal basis, in which event the properties of the Corporation will be worth more than the net figure at which they are carried on our books, and colono accounts can be successfully liquidated; or, if it shall become evident that the sugar industry in Cuba cannot succeed and prosper, which we do not believe will happen, no present revision of the value of our property accounts or colono accounts can be in any way beneficial.
The outstanding event in the raw sugar industry during the current year was the consummation of an International Agreement between the principal sugar producing countries of the world, except the United States and its insular possessions, providing for the segregation of surplus stocks in such a manner as to effect a curtailment of the production of such countries and the assignment of exportable quotas over a five-year period. This Agreement was made necessary by the continual decline in the price of raw sugar to a level below the cost of production which decline not only had a detrimental effect on the earnings of all producers, but imposed heavy financial burdens upon them. Mr. Thomas L. Chadbourne, acting as counsel for Cuban producers, was the originator of the above plan and after many months of negotiations it was finally accepted by Cuba, Java, Germany, Czecho-Slovakia, Poland, Hungary and Belgium.
The United States demand for Cuban raw sugar during the current year has been materially below the amount allocated by Cuba to this country under the terms of the International Agreement. For this reason the carry-over in Cuba at the end of 1931 may exceed 600,000 tons, exclusive of the 1,040,000 tons segregated under the International Agreement.
Notwithstanding the many advantages of the Agreement, particularly as to the arrangement with European beet sugar producers, who so far have reduced the 1931-32 European production (excluding Russia) by 2,400,000 tons and have segregated 740,000 tons, making an actual reduction in Europe (excluding Russia) of 3,140,000 tons, raw sugar prices have not responded satisfactorily as yet to the courageous and determined measures adopted by producers.
The Counsel of the Cuban producers was requested last September to discuss the situation with President Machado, in order to determine what steps could be taken to effect a balance between production and consumption by further curtailment of crops until such time as consumption shall absorb accumulated stocks. The discussion resulted in a proclamation by President Machado, which provides that the quota of Cuban raw sugar allocated to the United States in 1932 will be reduced by the amount of the carry-over in Cuba, after estimating the requirements of this country for 1932.
Delegates from the nations participating in the International Agreement are now meeting in Europe for further consideration of the world sugar situation, and there seems good reason for the expectation that additional action will be taken to ameliorate conditions that bear so heavily on the sugar industry everywhere.
It is difficult, if not impossible, to forecast what the future has in store for the sugar industry, but present prices are so low that a further material decrease in world production for the coming year can reasonably be expected not only in beet sugar but in cane sugar as well; and the natural effect from such a reduction should be a gradual improvement in the price structure.
It gives the Board of Directors much pleasure to acknowledge the very loyal cooperation of employees during the year.
Respectfully submitted,
By order of the Board of Directors,
JOHN R. SIMPSON,
President.
3
CUBAN CANE PRODUCTS CO., INC.
AND
EASTERN CUBA SUGAR CORPORATION
COMPARATIVE CONSOLIDATED
BALANCE SHEETSEPTEMBER 30, 1931
-September 30, 1930-
ASSETS
-September 30,1931-
$36,796,848.84 2,415,691.64
$2,531,927.49 1,940,674.79
4,806,214.79 885,155.84 527,499.06
$357,656.78 1,818,597.87 14,698,755.95 7,157,418.24
$7,541,337.71 218,032.37 290,771.04
tPROPERTIES, PLANT AND EQUIPMENT. Less: Reserve for Depreciation..............
$34,381,157.20
ROLLING STOCK ACQUIRED UNDER
106,000.00 LEASE PURCHASE CONTRACT........
(Liability included, per contra)
tREPUBLIC OF CUBA 5]/2% SUGAR STABILIZATION SINKING FUND BONDS 1940PAR VALUE:
Received...................................
Amount retained by National Sugar Export Corporation of Cuba pending shipment and ......... final liquidation of sugar..................
$36,962,778.67 2,382,081.41
$34,580,697.26 106,000.00
119,937.75 SECURITIES OF THE CORPORATION.
CURRENT ASSETS, ADVANCES TO COLONOS, GROWING CANE AND PREPAID EXPENSES CROP 1931-32: Cash ......................................
t Due upon delivery for sugars sold..........
t Sugars on hand; subsequently sold at selling prices and unsold, at market value at September 30, 1931, viz: 1.40c (C. & F.) per lb.
Accounts Receivable.......... $528,642.27
Less: Reserve............. 429,189.73
Materials and Supplies......................
t Advances to Colonos......... $14,014,854.79
Less: Reserve............. 7,258,722.12
t Growing Cane...............
( Prepaid Crop Expenses 1931-32.
5,756,132.67 224,002.65 32,251.72
19,505,212.84
631,542.16 257,115.21 378,919.48
MORTGAGES RECEIVABLE, LESS RESERVE ...................................
ADVANCE TO ASSOCIATED COMPANY...
INSTALMENTS PAID AND ACCRUED ON OUR OPTION TO PURCHASE LANDS..
CASH AND U. S. TREASURY BONDS:
For redemption of liens and censos, per 295,606.57 contra...................................
UNITED STATES 3]/2% LIBERTY BONDS DEPOSITED WITH GUARANTY TRUST COMPANY AS GUARANTEE IN RESPECT OF LIABILITY IN CONNECTION WITH CUBA CANE SUGAR CORPORATION BONDS NOT EXCHANGED IN ACCORDANCE WITH THE PLAN OF REORGANIZATION
(Liability, per contra)......................
100,968.75 $55,776,459.96
$2,908,440.00 618,700.00
$540,475.49 749,844.13
1,804,411.14
99,452.54 1,444,856.95
3,527,140.00 54,534.00
7,012,387.04
11,651,427.29
587,629.12 250,960.84
445,919.48 288,606.57
-September 30, 1930
LIABILITIES
$25,000,000.00 292,600.00
$24,707,400.00
8,000,000.00 280,000.00
$11,000,000.00 524,580.74 405,383.06
51,000.00 521,680.95
54,900.03
$97,003.46 132,295.20
50,484.37
$32,987,400.00
1,350,000.00
FUNDED DEBT:
Twenty Year Gold Debenture Bonds of the Cuban Cane Products Co., Inc., due 1950..
* Less : In hands of Trustee.............
* These bonds may be Issued in accordance with the plan of reorganization and if issued will discharge the liability marked **
Fifteen Year 7l/2% (Closed) Mortgage Sinking Fund Gold Bonds of the Eastern Cuba Sugar Corporation, due 1937...............
First Mortgage Bonds of the Violet Sugar Company, payable in annual instalments to 1935 .....................................
UNITED STATES FEDERAL INCOME TAXES, ADDITIONAL ASSESSMENTS FOR YEARS 1916 TO 1920: Due in instalments, June 30, 1932 to December 31, 1934.........................
CURRENT LIABILITIES: x Bank Loans:
Secured Notes................ $4,750,000.00
Collateral Notes, secured by $2,289,200.00 principal amount Republic of Cuba Stabilization Bonds (included per
contra) and other assets____ 1,842,883.44
Drafts outstanding under sugar
credit 1930/31............... 910,000.00
Drafts outstanding under dead season credit................ 990,000.00
Notes Payable ...............................
Accounts Payable.............................
Instalment due for rolling stock acquired under
lease purchase contract (per contra)........
Accrued Charges.............................
Accrued Interestll/2/o Mortgage Bonds, Eastern Cuba
Sugar Corporation, seven
months to September 30, 1931.. $328,125.00 Accrued InterestMortgage
Bonds, Violet Sugar Company,
three months to September 30,
1931 .........................
3,902.50
DEFERRED CREDITS:
Rents collected in advance. Other Deferred Credits....
12,557,544.78
229,298.66
LIENS AND CENSOS ON PROPERTIES (see item of Cash and U. S. Treasury Bonds,
295,606.57 per contra)...............................
CUBA CANE SUGAR CORPORATION:
** Account of Convertible Debenture Bonds not exchanged in accordance with the plan of reorganization.......................
Forward
$51,543,398.93
66,240.79 $47,486,090.80
-September 30, 1931-
$25,000,000.00 159,000.00
$24,841,000.00
7,500,000.00
223,000.00
$32,564,000.00
1,350,000.00
p8,492,883.44 40,500.00 383,408.25
23,500.00 1,016,434.99
332,027.50
$65,791.24 136,593.92
Forward
10,288,754.18
202,385.16
288,606.57
35,995.52 $44,729,741.43
4
5
CUBAN CANE
AND
EASTERN CUBA COMPARATIVE CONSOLIDATED
-September 30, 1930--, ASSETS '---September 30, 1931-,
$55,776,459.96 Forward ................... $51,543,398.93
DEFERRED DEBITS:
$791,312.31 Insurance, Rent, Taxes, etc., paid in advance. $376,946.49
146,788.58 Other Deferred Debits...................... 314,726.03
- 938,100.89 691,672.52
fBank Loans (marked x) and certain other liabilities are secured by a mortgage in the principal amount of $10,150,000.00 on properties, plant and equipment owned by Cuban Cane Products Co., Inc., and by mortgage or pledge of the other items markedf. In addition, there are similarly pledged the following items not shown on this Consolidated Balance Sheet: The entire capital stock of Eastern Cuba Sugar Corporation (48,000 shares of $100 par value each owned by Cuban Cane Products Co., Inc.), a certain bond issued to Cuban Cane Products Co., Inc., by Eastern Cuba Sugar Corporation in the principal amount of $900,000 (secured by first mortgage on Central Velasco and certain other mortgageable properties of Eastern Cuba Sugar Corporation not subject to any other mortgage), and a demand note in the sum of $2,161,782.77 issued by Eastern Cuba Sugar Corporation in favor of Cuban Cane Products Co., Inc. Central Violeta and certain other mortgageable properties of Eastern Cuba Sugar Corporation are mortgaged to secure the first mortgage bonds of Violet Sugar Company and the Fifteen Year IViJo Mortgage Sinking Fund Gold Bonds of Eastern Cuba Sugar Corporation shown on this Balance Sheet.
$56,714,560.85 $52,235,071.45
6
PRODUCTS CO., INC.
SUGAR CORPORATION
BALANCE SHEETSEPTEMBER 30, 1931 (Cont'd)
-September 30, 1930-- LIABILITIES '--September 30, 1931--,
$47,486,090.80 Forward ................... $44,729,741.43
243,305.49 GENERAL RESERVE......................... 324,873.25
STATED CAPITAL:
Cuban Cane Products Co. Inc. 998,487 shares of Common Stock without nominal or par valueStated Value $1.00 997,151.00 per share................................. 998,487.00
(Out of the authorized issue of 3,500,000
shares, there are reserved unissued shares
against the exercise at any time prior to
January 1, 1940, of Option Warrants to purchase the shares at $20.00 per share.) The entire issue of the Capital Stock of the
Eastern Cuba Sugar Corporation, viz:
48,000 shares of $100.00 each par value, is
owned by Cuban Cane Products Co., Inc.
CONSOLIDATED SURPLUS :
1,581,391.45 Paid in (per attached statement)............ $8,476,700.72
593,377.89 Earned (per attached statement) (Deficit) 2,294,730.95 7,988,013.56 6,181,969.77
CONTINGENT LIABILITIES :
In respect of bank loans to Associated Company $198,576.50 guaranteed jointly and severally by Eastern Cuba Sugar Corporation and Baragua Sugar Company.
In respect of Letters of Credit issued to Cuban Cane Products Co., Inc., $77,858.00.
$56,714,560.85 $52,235,071.45
7
AUDITOR'S CERTIFICATE
Board of Directors,
Cuban Cane Products Co., Inc., New York.
Dear Sirs :
We have audited the books and records of the Cuban Cane Products Co., Inc., and the Eastern Cuba Sugar Corporation as at September 30, 1931, in New York and in Cuba.
Owing to the present economic conditions affecting the price of sugar we are unable to form an opinion as to the value of the colonos accounts and other assets and properties in Cuba, which are shown on the accompanying Consolidated Balance Sheet at book values. The unsold sugars have been valued by the company at 1.40^ (C. & F.) per pound, the market price at September 30, 1931.
Subject to the foregoing and to the fact that no depreciation has been provided for the year, we are of the opinion that the accompanying Consolidated Balance Sheet and Consolidated Statements of Profit and Loss and Surpluses correctly set forth the consolidated financial position of the companies as at September 30, 1931 and the result of their operations for the year ended that date.
Yours very truly,
Deloitte, Plender, Griffiths & Co.,
Auditors.
49 Wall Street, New York, November 30, 1931.
CUBAN CANE PRODUCTS CO., INC.
and
EASTERN CUBA SUGAR CORPORATION STATEMENT OF CONSOLIDATED PROFIT AND LOSS
For the Year Ended September 30, 1931
Operating loss for the year (subject to final liquidation at December 31,
1931 of cane purchased during crop)...................................... $863,838.01
Add:
Interest on bank loans..................................... $638,181.84
Miscellaneous interest, discount and exchange............. 165,324.38
$803,506.22
Less:
Interest Income............................................. 318,816.37 484,689.85
Miscellaneous expenses (net)............................................ 26,536.51
Taxes paid during year.................................................... 38,301.86
Net loss for the year before charging interest on bonds and depreciation. $1,413,366.23
STATEMENT OF CONSOLIDATED SURPLUSES
September 30, 1931
Paid in surplus :
Balance, October 1, 1930................................................ $8,581,391.45
Deduct:
Adjustment in respect of bonds and common stock issued under plan of
reorganization in exchange for bonds of Cuba Cane Sugar Corporation.. 104,690.73
Balance, September 30, 1931............................................. $8,476,700.72
Earned surplus:
Balance, October 1, 1930 (Deficit)...................................... $593,377.89
Discount on bonds purchased and retired................................ 303,731.25
$289,646.64
Net loss for the year before charging interest on bonds and depreciation,
as per statement.................................................... 1,413,366.23
$1,703,012.87
Interest on Eastern Cuba Sugar Corporation Fifteen Year (Closed) Mortgage Sinking Fund Gold Bonds:
Paid ................................................ $244,990.58
Accrued for seven months ended September 30, 1931... 328,125.00
$573,115.58
Interest on First Mortgage Bonds of Violet Sugar Company .................................................. 18,602.50 591,718.08
Balance, September 30, 1931 (Deficit).................................. $2,294,730.95
Consolidated Surpluses................................................. $6,181,969.77
8
CUBAN CANE PRODUCTS CO., INC.
AND
EASTERN CUBA SUGAR CORPORATION
STATEMENT OF CONSOLIDATED PROFIT AND LOSS
For the Year Ended September 30, 1931
OPERATING LOSS FOR THE YEAR (subject to final liquidation at December 31,
1931 of cane purchased during crop) .................................... $863,838.01
Add:
INTEREST ON BANK LOANS......................................
MISCELLANEOUS INTEREST, DISCOUNT AND EXCHANGE..............
Less:
INTEREST INCOME.............................................
$638,181.84
165,324.38
$803,506.22
318,816.37
MISCELLANEOUS EXPENSES (NET) ............... ..........................
TAXES PAID DURING YEAR ....................................................
NET LOSS FOR THE YEAR BEFORE CHARGING INTEREST ON BONDS AND DEPRECIATION..
STATEMENT OF CONSOLIDATED SURPLUSES
September 30, 1931
PAID IN SURPLUS:
Balance, October 1, 1930...................... ............. ............
Deduct:
Adjustment in respect of bonds and common stock issued under plan of
reorganization in exchange for bonds of Cuba Cane Sugar Corporation..
Balance, September 30, 1931................................... ..........
EARNED SURPLUS:
Balance, October 1, 1930 (Deficit)..................................... ..
Discount on bonds purchased and retired..............................
Net loss for the year before charging interest on bonds and depreciation,
as per statement ....................... ........... ............... .....
Interest on Eastern Cuba Sugar Corporation Fifteen Year (Closed)
Mortgage Sinking Fund Gold Bonds:
Paid ......................................... .. $244,990.58
Accrued for seven months ended September 30, 1931... 328,125.00
$573,115.58
Interest on First Mortgage Bonds of Violet Sugar Com-
pany ................................................. 18,602.50
Balance, September 30, 1931 (Deficit) ................................
Consolidated Surpluses................................................
484,689.85
26,536.51
38,301.86
$1,413,366.23
$8,581,391.45
104,690.73
$8,476,700.72
$593,377.89
303,731.25
$289,646.64
1,413,366.23
$1,703,012.87
591,718.08
$2,294,730.95
$6,181,969.77
CUBAN CANE PRODUCTS CO., INC.
ANNUAL REPORT
1931
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1931
during the fiscal year ended September 30, 1931, $189,274.62 net proceeds from
sales of molasses and $232,514.66 from miscellaneous sources, as compared with
$1,412,483.26 from molasses and $186,328.33 from miscellaneous sources the
previous year. This additional income, if applied to our 1931 average sale price
f. o. b. Cuba, would increase such average from 1.232 cents per pound as shown
in the foregoing, to 1.288 cents per pound.
The total production of sugar (in bags of 325 pounds), has been as follows
during the past five crops:
Total
Our Cuban
Production Production Our %
1930-31........ 2,308,886 21,519,067 10.7
1929-30 ........ 3,251,362 32,195,761 10.1
1928-29........ 3,965,275 35,538,909 11.2
1927-28........ 3,232,007 27,829,987 11.6
1926-27 ........ 3,425,904 31,074,162 11.0
The National Sugar Export Corporation of Cuba, a corporation organized in
Cuba under the Sugar Stabiization Law dated November 15, 1930, for the pur-
pose of acquiring and selling, in an orderly manner and over a five-year period,
1,500,000 tons of Cuban raw sugar, finally fixed your Corporation's proportion at
913,105 bags of 325 pounds. Of this quantity, 653,326 bags had been acquired
from us at the time of our last Annual Report. The balance of 259,779 bags,
which included 23,271 bags delivered for account of colonos, was acquired during
the fiscal year under review.
For this sugar acquired by the National Sugar Export Corporation we have
received Cuban Government 5Y2% Bonds at the rate of $4.00 per bag of sugar
f. o. b. Cuban ports aggregating in amount $2,908,440.00 par value, and shall
be entitled to receive $618,700.00 additional amount of bonds as sugar now held
in our warehouses, is delivered by us f. o. b. Cuban ports, and when balances
retained for final determination of weights and polarizations are liquidated.
Since September 30, 1931, the National Sugar Export Corporation has
redeemed from us $414,800.00 of the above mentioned bonds at par plus interest
to November 21, 1931, and the cash received has been applied to reduction of our
bank loans secured by such bonds.
The average percentage of weight of sugar produced to weight of cane ground
in our mills has been as follows for the past five years:
1930-31 1929-30 1928-29 1927-28 1926-27
12.83% 12.39% 12.23% 11.56% 11.23%
The average efficiency of our sugar mills is reflected in the following com-
parison of losses in manufacturing:
1930-31 1929-30 1928-29 1927-28 1926-27
1.54% 1.54% 1.80% 1.91% 1.81%
Your Corporation owns in fee 472,660 acres of land, and holds under lease
298,365 acres. Total lands owned and leased are therefore 771,025 acres. It owns
and operates for the transportation of its cane, products and supplies 983 miles of
railroad, of which 799 miles are standard gauge and 184 miles narrow gauge;
together with equipment consisting of 137 locomotives and 3,802 cane and
other cars.
On February 16, 1930 your Corporation took over from the predecessor com-
pany, Cuba Cane Sugar Corporation, the assets of the predecessor company. Prop-
erties owned were set up in the Balance Sheet of the new Corporation at $19,839,-
803.81, a reduction of $44,257,594.80 from the sum of $64,097,398.61, at which the
properties had stood on the books of the predecessor company. Since the time of
its incorporation, the new Corporation has had to contend with a highly demoralized
sugar market as indicated previously in this report, and under these circumstances,
your Directors feel that nothing can be gained either in the interest of the security
CUBAN CANE
AND
EASTERN CUBA
COMPARATIVE CONSOLIDATED
,-- September 30, 1930-- ASSETS ----September 30, 1931----
$55,776,459.96 Forward ................... $51,543,398.93
DEFERRED DEBITS:
$791,312.31 Insurance, Rent, Taxes, etc., paid in advance. $376,946.49
146,788.58 Other Deferred Debits...................... 314,726.03
938,100.89 691,672.52
tBank Loans (marked x) and certain other lia-
bilities are secured by a mortgage in the principal
amount of $10,150,000.00 on properties, plant and
equipment owned by Cuban Cane Products Co.,
Inc., and by mortgage or pledge of the other items
marked. In addition, there are similarly pledged
the following items not shown on this Consoli-
dated Balance Sheet: The entire capital stock of
Eastern Cuba Sugar Corporation (48,000 shares
of $100 par value each owned by Cuban Cane
Products Co., Inc.), a certain bond issued to
Cuban Cane Products Co., Inc., by Eastern Cuba
Sugar Corporation in the principal amount of
$900,000 (secured by first mortgage on Central
Velasco and certain other mortgageable properties
of Eastern Cuba Sugar Corporation not subject
to any other mortgage), and a demand note in the
sum of $2,161,782.77 issued by Eastern Cuba Sugar
Corporation in favor of Cuban Cane Products Co.,
Inc. Central Violeta and certain other mortgage-
able properties of Eastern Cuba Sugar Corpora-
tion are mortgaged to secure the first mortgage
bonds of Violet Sugar Company and the Fifteen
Year 712% Mortgage Sinking Fund Gold Bonds
of Eastern Cuba Sugar Corporation shown on
this Balance Sheet.
$56,714,560.85 $524235,071.45
AUDITOR'S CERTIFICATE
49 WALL STREET,
NEW YORK, NOVEMBER 30, 1931.
BOARD OF DIRECTORS,
Cuban Cane Products Co., Inc.,
New York.
DEAR SIRS:
We have audited the books and records of the Cuban Cane Products Co., Inc.,
and the Eastern Cuba Sugar Corporation as at September 30, 1931, in New York
and in Cuba.
Owing to the present economic conditions affecting the price of sugar we are
unable to form an opinion as to the value of the colonos accounts and other assets
and properties in Cuba, which are shown on the accompanying Consolidated Balance
Sheet at book values. The unsold sugars have been valued by the company at
1.400 (C. & F.) per pound, the market price at September 30, 1931.
Subject to the foregoing and to the fact that no depreciation has been provided
for the year, we are of the opinion that the accompanying Consolidated Balance
Sheet and Consolidated Statements of Profit and Loss and Surpluses correctly set
forth the consolidated financial position of the companies as at September 30, 1931
and the result of their operations for the year ended that date.
Yours very truly,
DELOITTE, PLENDER, GRIFFITHS & CO.,
Auditors.
CUBAN CANE
AND
EASTERN CUBA
COMPARATIVE CONSOLIDATED
---September 30, 1930---
$36,796,848.84
2,415,691.64
$34,381,157.20
106,000.00
ASSETS ,--September 30,1931--,
tPROPERTIES, PLANT AND EQUIPMENT. $36,962,778.67
Less: Reserve for Depreciation ............. 2,382,081.41
$34,580,697.26
ROLLING STOCK ACQUIRED UNDER
LEASE PURCHASE CONTRACT........ 106,000.00
(Liability included, per contra)
REPUBLIC OF CUBA 5%% SUGAR STA-
BILIZATION SINKING FUND BONDS-
1940-PAR VALUE:
Received ...................................
Amount retained by National Sugar Export
Corporation of Cuba pending shipment and
final liquidation of sugar................
119,937.75 SECURITIES OF THE CORPORATION......
$2,531,927.49
1,940,674.79
4,806,214.79
885,155.84
527,499.06
$357,656.78
1,818,597.87
14,698,755.95
7,157,418.24
$7,541,337.71
218,032.37
290,771.04
19.505212.84
CURRENT ASSETS, ADVANCES TO COLO-
NOS, GROWING CANE AND PREPAID
EXPENSES CROP 1931-32:
Cash .............................
t Due upon delivery for sugars sold..........
t Sugars on hand; subsequently sold at selling
prices and unsold, at market value at Sep-
tember 30, 1931, viz: 1.40c (C. & F.) per lb.
Accounts Receivable .......... $528,642.27
Less: Reserve ............. 429,189.73
Materials and Supplies.....................
t Advances to Colonos......... $14,014,854.79
Less: Reserve........... 7,258,722.12
$6,756,132.67
t Growing Cane............... 224,002.65
- Prepaid Crop Expenses 1931-32. 32,251.72
$540,475.49
749,844.13
1,804,411.14
99,452.54
1,444,856.95
7,012,387.04
MORTGAGES RECEIVABLE, LESS RE-
631,542.16 SERVE .............. .......................
257,115.21 ADVANCE TO ASSOCIATED COMPANY...
378,919.48 INSTALMENTS PAID AND ACCRUED ON
OUR OPTION TO PURCHASE LANDS..
CASH AND U. S. TREASURY BONDS:
For redemption of liens and censos, per
295,606.57 contra ....................................
UNITED STATES 3%% LIBERTY BONDS
DEPOSITED WITH GUARANTY TRUST
COMPANY AS GUARANTEE IN RE-
SPECT OF LIABILITY IN CONNEC-
TION WITH CUBA CANE SUGAR COR-
PORATION BONDS NOT EXCHANGED
IN ACCORDANCE WITH THE PLAN OF
REORGANIZATION
100,968.75 (Liability, per contra).....................
Forward .................. .
$2,908,440.00
618,700.00
3,527,140.00
54,534.00
11,651,427.29
587,629.12
250,960.84
445,919.48
288,606.57
50,484.37
$51,543,398.93
$55,776,459.96
CUBAN CANE PRODUCTS CO., INC.
63 WALL STREET
NEW YORK
DECEMBER 24, 1931.
To THE STOCKHOLDERS:
Your Board of Directors submits herewith the annual report for the year
ended September 30, 1931, together with Consolidated Balance Sheet of Cuban
Cane Products Co., Inc., and its wholly owned subsidiary, the Eastern Cuba Sugar
Corporation, as of that date.
There are also submitted Consolidated Statements of Profit and Loss and
Surpluses of the same corporations.
The Profit and Loss statement shows an operating loss of $863,838.01 after
valuing sugars on hand September 30, 1931, as stated in the Balance Sheet, as
compared with an operating loss of $1,617,933.48 incurred the previous year and,
after interest charges, taxes, etc., but excluding depreciation, a total loss of
$1,413,366.23, as compared with $1,936,465.28 the previous year. Corresponding
figures (except as noted) have been as follows for the past five years:
Bond & Other
Operating Interest, and
Profit Charges Depreciation Net Profit
1930-31........ $863,838.01t $549,528.22* .......... $1,413,366.23t
1929-30........ 1,617,933.48t 715,836.18 $778,005.25 3,111,774.91t
1928-29........ 3,649,435.44 2,705,267.14 1,750,000.00 805,831.70-
1927-28........ 4,366,554.50 2,402,285.31 1,750,000.00 214,269.19
1926-27........ 5,275,599.30 2,583,472.34 1,750,000.00 942,126.96
t Loss.
Does not include bond interest paid or accrued, for year ended September 30, 1931.
The loss for the year resulted from the fact that during the period in which all
but a relatively small proportion of the sugar we produced was being sold, Cuban
raw sugar sold at a lower average price than ever before in the history of the
industry. The cost of production of our sugars was 1.453 cents per pound f. o. b.
Cuban ports, the lowest cost ever recorded by us. At the date of this report
substantially all our 1931 sugar has been sold, and the average price realized,
adjusted to give effect to sales since September 30, 1931, is 1.232 cents per pound
f. o. b. Cuban ports.
The President of Cuba, by virtue of authority vested in him according to the
Sugar Stabilization Law of November 15, 1930, restricted the total Cuban 1930-31
Crop to 3,122,000 tons. Notwithstanding the fact that your Corporation's produc-
tion of sugar was, by this restrictive action, reduced from 3,251,362 bags in 1929-30
to 2,308,886 bags in 1930-31, a reduction of 29%, the cost per pound of the sugar
made was substantially below the cost of the previous year. Our cane cost was less,
as is shown in the following comparative tabulation, and vigorous economy measures
made it possible for us to reduce manufacturing and delivering costs, while still
absorbing all overhead items directly chargeable to costs.
Cost of
Cost of Manufacturing Total Cost Sale Price
Cane and Delivering f.o.b. Cuba f.o.b. Cuba
1930-31........ .5290 .9240 1.4530 1.2320
1929-30........ .617 .967 1.584 1.309
1928-29........ .794 .870 1.664 1.832
1927-28........ 1.156 .993 2.149 2.470
1926-27........ 1.415 1.078 2.493 2.843
The foregoing comparison of average sale prices has to do with sales of raw
sugar only. In addition to the income from sugar, your Corporation received
PRODUCTS
CO., INC.
SUGAR CORPORATION
BALANCE SHEET-SEPTEMBER 30, 1931
,---September 30, 1930-----
LIABILITIES
,--September 30, 1931--
FUNDED DEBT:
Twenty Year Gold Debenture Bonds of the
Cuban Cane Products Co., Inc., due 1950..
*Less: In hands of Trustee.............
These bonds may be issued in accordance
with the plan of reorganization and if
issued will discharge the liability
marked **
Fifteen Year 7%% (Closed) Mortgage Sink-
ing Fund Gold Bonds of the Eastern Cuba
Sugar Corporation, due 1937...............
First Mortgage Bonds of the Violet Sugar
Company, payable in annual instalments to
1935 ....................................
$32,987,400.00
$32,98,400. UNITED 'STATES FEDERAL INCOME
TAXES, ADDITIONAL ASSESSMENTS
FOR YEARS 1916 TO 1920:
Due in instalments, June 30, 1932 to De-
1,350,000.00 cember 31, 1934........................
CURRENT LIABILITIES:
x Bank Loans:
Secured Notes................ $4,750,000.00
Collateral Notes, secured by
$2,289,200.00 principal amount
Republic of Cuba Stabiliza-
tion Bonds (included per
contra) and other assets.... 1,842,883.44
Drafts outstanding under sugar
credit 1930/31............... 910,000.00
Drafts outstanding under dead
season credit ............... 990,000.00
Notes Payable ..............................
Accounts Payable.............................
Instalment due for rolling stock acquired under
lease purchase contract (per contra)........
Accrued Charges........................
Accrued Interest--7%% Mort-
gage Bonds, Eastern Cuba
Sugar Corporation, seven
months to September 30, 1931.. $328,125.00
Acc r u ed Interest-Mortgage
Bonds, Violet Sugar Company,
three months to September 30,
1931 ......................... 3,902.50
$25,000,000.00
292,600.00
$24,707,400.00
8,000,000.00
280,000.00
$11,000,000.00
524,580.74
405,383.06
51,000.00
521,680.95
54,900.03
$97,003.46
132,295.20
DEFERRED CREDITS:
Rents collected in advance..................
Other Deferred Credits............. .....
LIENS AND CENSOS ON PROPERTIES
(see item of Cash and U. S. Treasury Bonds,
295,606.57 per contra)...............................
CUBA CANE SUGAR CORPORATION:
**Account of Convertible Debenture Bonds
not exchanged in accordance with the plan
66,240.79 of reorganization......................
Forward ......................
$25,000,000.00
159,000.00
$24,841,000.00
7,500,000.00
223,000.00
12,557,544.78
22Q208 66
$32,564,000.00
1,350,000.00
$8,492,883.44
40,500.00
383,408.25
23,500.00
1,016,434.99
332,027.50
$65,791.24
136,593.92
10,288,754.18
202,385.16
288,606.57
35,995.52
$44,729,741.43
$47,486,090.80
PRODUCTS CO., INC.
SUGAR CORPORATION
BALANCE SHEET-SEPTEMBER 30, 1931 (Cont'd)
r--- September 30, 1930---
$47,486,090.80
LIABILITIES
,---September 30, 1931---,
Forward ..................
243,305.49 GENERAL RESERVE........................
STATED CAPITAL:
Cuban Cane Products Co. Inc.
998,487 shares of Common Stock without
nominal or par value-Stated Value $1.00
$8,581,391.45
593,377.89
997,151.00
7,988,013.56
per share............................
(Out of the authorized issue of 3,500,000
shares, there are reserved unissued shares
against the exercise at any time prior to
January 1, 1940, of Option Warrants to pur-
chase the shares at $20.00 per share.)
The entire issue of the Capital Stock of the
Eastern Cuba Sugar Corporation, viz:
48,000 shares of $100.00 each par value, is
owned by Cuban Cane Products Co., Inc.
CONSOLIDATED SURPLUS:
Paid in (per attached statement) ............
Earned (per attached statement) (Deficit)
CONTINGENT LIABILITIES:
In respect of bank loans to Associated Company
$198,576.50 guaranteed jointly and severally
by Eastern Cuba Sugar Corporation and
Baragua Sugar Company.
In respect of Letters of Credit issued to Cuban
Cane Products Co., Inc., $77,858.00.
324,873.25
998,487.00
$8,476,700.72
2,294,730.95
6,181,969.77
$56,714,560.85
$44,729,741.43
$52,235,071.45
holders of the Corporation, or of the Corporation itself, in endeavoring now to
re-value the properties owned by the Corporation or its colono accounts receivable.
Either the sugar industry in Cuba can become prosperous and succeed through
stabilization of world raw sugar prices on a reasonable and normal basis, in which
event the properties of the Corporation will be worth more than the net figure at
which they are carried on our books, and colono accounts can be successfully liqui-
dated; or, if it shall become evident that the sugar industry in Cuba cannot succeed
and prosper, which we do not believe will happen, no present revision of the value
of our property accounts or colono accounts can be in any way beneficial.
The outstanding event in the raw sugar industry during the current year was
the consummation of an International Agreement between the principal sugar
producing countries of the world, except the United States and its insular posses-
sions, providing for the segregation of surplus stocks in such a manner as to effect
a curtailment of the production of such countries and the assignment of exportable
quotas over a five-year period. This Agreement was made necessary by the con-
tinual decline in the price of raw sugar to a level below the cost of production-
which decline not only had a detrimental effect on the earnings of all producers,
but imposed heavy financial burdens upon them. Mr. Thomas L. Chadbourne, act-
ing as counsel for Cuban producers, was the originator of the above plan and after
many months of negotiations it was finally accepted by Cuba, Java, Germany,
Czecho-Slovakia, Poland, Hungary and Belgium.
The United States demand for Cuban raw sugar during the current year has
been materially below the amount allocated by Cuba to this country under the terms
of the International Agreement. For this reason the carry-over in Cuba at the end
of 1931 may exceed 600,000 tons, exclusive of the 1,040,000 tons segregated under
the International Agreement.
Notwithstanding the many advantages of the Agreement, particularly as to the
arrangement with European beet sugar producers, who so far have reduced the
1931-32 European production (excluding Russia) by 2,400,000 tons and have segre-
gated 740,000 tons, making an actual reduction in Europe (excluding Russia) of
3,140,000 tons, raw sugar prices have not responded satisfactorily as yet to the
courageous and determined measures adopted by producers.
The Counsel of the Cuban producers was requested last September to discuss
the situation with President Machado, in order to determine what steps could be
taken to effect a balance between production and consumption by further curtail-
ment of crops until such time as consumption shall absorb accumulated stocks. The
discussion resulted in a proclamation by President Machado, which provides that the
quota of Cuban raw sugar allocated to the United States in 1932 will be reduced by
the amount of the carry-over in Cuba, after estimating the requirements of this
country for 1932.
Delegates from the nations participating in the International Agreement are
now meeting in Europe for further consideration of the world sugar situation, and
there seems good reason for the expectation that additional action will be taken to
ameliorate conditions that bear so heavily on the sugar industry everywhere.
It is difficult, if not impossible, to forecast what the future has in store for the
sugar industry, but present prices are so low that a further material decrease in
world production for the coming year can reasonably be expected not only in beet
sugar but in cane sugar as well; and the natural effect from such a reduction should
be a gradual improvement in the price structure.
It gives the Board of Directors much pleasure to acknowledge the very loyal
cooperation of employees during the year.
Respectfully submitted,
By order of the Board of Directors,
JOHN R. SIMPSON,
President.
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