Wool exporter reports $1.03 m interim profit

News release

Leading wool exporter reports $1.036 million interim profit

Leading wool exporter NZ Wool Services International Limited (WSI) has reported a tax paid profit of $1.036 million for the six months to 31 December 2008, a reduction on the $1.112 million profit reported for the equivalent period in 2007.

Michael Dwyer, managing director of WSI, which exports around 40 per cent of New Zealand’s strong wool clip, says that in particularly challenging circumstances, the result is an excellent one.

“This period has seen unprecedented upheaval in international financial markets, which has flowed swiftly and savagely through the wool sector.

“Impacts on our business have included the sharp devaluation of the New Zealand dollar; significant reductions in New Zealand wool prices; and a major slowdown in international demand for wool. We have suffered from contractual problems associated with these effects.

“Such a tumultuous environment has clearly had negative consequences for our reported result. Through our experience, efficiency of operations and reputation in the international wool trade, WSI has managed its way through these extremely difficult times and still recorded a profit.”

“While that profit is down on last year, in the circumstances we are pleased with the achievement, and believe there is cause for cautious optimism in the second half of the year,” he said.

According to Michael Dwyer, prospects for improvement would be enhanced if more resource and focus were applied industry-wide to the international promotion of New Zealand wool.

“More so than ever, the whole industry needs to pull together, establish strong relationships with genuine international partners in the manufacture and marketing of strong wool products, and clearly articulate the superiority of New Zealand wool. While that is what we have been doing successfully through our Purelana scoured wool brand, such initiatives would cut through much more powerfully with additional resource and the concerted support of all major players in the wool industry,” he said.

Michael Dwyer said the company’s second half financial performance is traditionally stronger than the first six months.

“We are reasonably upbeat and believe WSI should have a satisfactory full 12 months.

“While prices are exceptionally low at present, due mainly to the international financial crisis, most in our industry predict that wool prices will improve before any other obvious recovery in the world economy.

“We do not believe the present financial turmoil will continue forever. As and when the international situation stabilises and commences a recovery, we foresee a healthy and significant turn around in prices. Of course, this optimism must be tempered due to the uncertain international financial situation, and the lack of clarity on how long it will last,” he said.

He also expects rationalisation in the wool-scouring sector will benefit WSI.

 “We are participating in the rationalisation programme currently under consideration by the Commerce Commission. Should the restructure eventuate, then WSI will own two of the five scours remaining in New Zealand: Kaputone Wool Scour at Belfast north of Christchurch, and Whakatu Wool Scour near Hastings.

“If this proceeds, we will expand from operating principally as a merchant wool scourer, scouring mainly our own wool, to provide more commission scouring for third parties within the wool industry,” said Michael Dwyer.

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