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Wools of New Zealand well set for end of grower-funding

Wools of New Zealand well set for end of grower-funding

Wools of New Zealand (WNZ) Chairman Mark Shadbolt says the company is making strong commercial progress with an expected maiden profit for the 2016 financial year.

Shadbolt was responding to a recent shareholder comment in a local rural newspaper that the company would “almost certainly fail” without income from farmers’ Wool Market Development Commitment (WMDC).

“To the contrary, WNZ is making investments that are reducing the company’s reliance on the WMDC.”

Shadbolt says for the year ended June 30, 2016, WNZ expects a maiden operating profit of more than $600,000 and a net after-tax profit of more than $1.1 million.

WNZ’s grower shareholders committed to pay the WMDC out of their clip when they funded the company in a capital-raise in 2012/13.

“We’ve always known and planned for the WMDC to conclude in June 2018 and thereafter for the business to be in a position to be self supporting and profitable.”

Initially, WNZ was totally reliant on WMDC.

However, over time WNZ’s reliance on the WMDC had been steadily decreased as WNZ developed other revenue streeams.

In 2013/14, WMDC was $2.2m representing 20 per cent of gross revenue. For 2015/16 the expected WMDC would be $2.6m representing less than 8 per cent of expected total revenue.

WNZ expected its revenues would continue to increase due to ongoing increased commercial activity. The WMDC would increase in dollar terms through to 2018 but continue to decrease as a percentage of WNZ’s total gross revenue.

Shadbolt says it is regretful that the shareholder called for the Financial Markets Authority to “look at WNZ performance and vs Prospectus and call the directors to account.”

“The company’s performance met its prospectus targets to the 2014 financial year and there were no prospectus-related commitments after that year.

“As a grower I am bitterly disappointed with the ongoing destructive behaviour of individuals and entities who would rather see the ongoing exodus of growers rather than a thriving and prosperous sheep industry.”

WNZ expected its revenue to keep rising as it did more business. Income from the WMDC would also rise, but only because it was handling more wool.

WNZ has made strong progress in the past 15 months, rolling out an improved ‘Direct to Scour’ processing and sales model, investing in new technology to differentiate WNZ fibre and increasing the value of WNZ brands and grower contracts.

Shadbolt said some of the investment, like Oritain traceability, GlacialXT and Kiteq had attracted government investment to get products to market faster.

ENDS

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