Exporter Predicts Wool Grower Anger with Scouring Monopoly

15 December 2011

Exporter Predicts Wool Grower Anger with Scouring Monopoly End Game

The New Zealand wool industry will lose a pivotal asset if Cavalier Wool Holdings strips the scouring operation out of Wool Services International and "disposes" of the trading arm, says Peter Crone, the managing director of Christchurch wool exporter John Marshall & Co.

Wool Services International (WSI) is New Zealand's biggest wool exporter and has a large number of woolgrower shareholders. It will be broken up by Cavalier Wool Holdings, who have been given the green light from the Commerce Commission to establish a scouring monopoly in New Zealand.

While WSI recently announced a record $6.6 million profit for their last financial year, 64 percent of the company is owned by Plum Duff and Woolpak Holdings, which have become caught up in the South Canterbury Finance collapse and are being sold by a receiver. CWH is one of several parties interested in the majority shareholding stake.

"We were amazed with the Commerce Commission decision, which has been upheld by the High Court following an appeal by carpet manufacturer Godfrey Hirst," Mr Crone said. "Both of these entities had under-estimated the costs and over-estimated the benefits to the overall economy that will result. "I am sure wool growers will become very angry when they realise the implications of this CWH monopoly for the future of their industry," said Mr Crone.

"Growers have consistently said they want to invest and have an ownership stake in a vertically integrated, large-scale, wool industry player and WSI fits this profile," he said. "Now there's a threat WSI will be dismantled and abandoned."

Mr Crone said the Commerce Commission made a serious mistake with the last wool industry rationalisation, when they sanctioned a wool dumping and handling monopoly. Everyone exporting greasy wool is now paying 19 percent more in Christchurch and 27 percent more in Napier as a direct result of a poor Commerce Commission decision.

Godfrey Hirst, which has factories in New Zealand and Australia, says if the CWH monopoly proceeds it will consider its options, which include relocating some of its New Zealand operations overseas. CWH is 50 percent owned by Godfrey Hirst's rival carpet manufacturer Cavalier Corporation. Mr Crone said although his manufacturing operation is very small by comparison to Godfrey Hirst, he was also considering closing down his New Zealand processing plant and moving to Melbourne.

"If this takeover and resulting monopoly proceeds it will cost our company an additional $200,000 to $300,000 a year of increased charges, which I am not prepared to accept," Mr Crone said.

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