Norman Ellison Carpets spinning plant to close

27 June 2012

Media release

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Norman Ellison Carpets spinning plant to close

Cavalier Corporation has advised staff at the yarn spinning plant of its subsidiary company Norman Ellison Carpets (NEC) that the plant is closing down on 26 July. Staff affected by the closure were given the news at site meetings this morning.

Managing Director of Cavalier Corporation, Colin McKenzie, said the decision was not taken lightly and came after a very thorough review process involving all of the Group’s three woollen yarn spinning plants.

“For some time we have had over-capacity at our plants and rationalising our operations is the only responsible option for us to balance woollen yarn spinning capacity with woollen carpet sales. This has not been an easy decision but the Auckland plant operated by NEC does not have the same long-term potential as our two purpose-built spinning plants in Napier and Wanganui.”

Mr McKenzie said that the net job loss would be around 70.

“Eight staff will transfer from the yarn spinning plant into NEC’s tufting plant and it is our hope that at least a dozen more will relocate to other plants within the Group. Some will be retained while we de-commission and reinstall some of the existing NEC equipment at our other plants. All staff will be given every assistance to find other employment including job support outplacement and retraining allowances.”

Staff have been advised of their redundancy entitlements and the plant will stop making yarn before the end of July.

Mr McKenzie stressed that the NEC carpet business and the Norman Ellison Carpets brand itself are not affected by the move.

“This decision is about reducing over-capacity in the woollen yarn spinning operations that support our broadloom carpet manufacturing operations. NEC will continue to make carpet at its Onehunga tufting plant, supported by very capable manufacturing and sales teams.

In April, Cavalier Corporation signalled that its earnings for the current financial year would be affected by one-off restructuring costs, even though the impact of the restructuring was difficult to project because of uncertainties as to timing. At this stage, the Company still believes that if the estimated cost of all contemplated initiatives was taken into the current year, it would have the effect of reducing underlying earnings of between $3-5 M after tax to a loss of $1-3 M after tax.

The closure of the NEC spinning plant will result in a significant reduction in operating costs for the broadloom carpet business and is an integral part of the comprehensive business improvement program aimed at delivering $10-12 M profit after tax in the 2012-13 year, said Mr McKenzie.

ENDS

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