28,500 copies distributed monthly – to every rural mailbox in Canterbury and the West Coast.
June 2012
INSIDE Disco’s remains fund Page 2
MRLs — what are they and why do we need them? Page 8
A breakthrough for quad safety
Page 15
Keri Johnston, Queen of ponds
CONTACT US Canterbury Farming 03 347 2314
WEL’s export dream
By Hugh de Lacy The last relics of the muchmaligned Wool Board have been ground up to fertilise publicly-listed farmer-owned Wool Equities Limited’s (WEL’s) efforts to create an expansive co-operative structure for the wool industry. And its biggest investment so far is in the former Bruce Woollen Mills in Milton, Otago, which itself began as a famer-owned co-operative in 1897 and grew to employ 300 people. The Wool Board Disestablishment Company (Disco) late last month issued its final report on distribution of former Wool Board monies, of which $69.5 million went to its former suppliers. The remaining cash, $2.9m, was turned over to WEL late last year and, after investing $400,000 in acquiring twothirds of the former Quality Yarns’ factory in Milton, the company holds $2.5m in cash plus a further $1m in assets. WEL is resurrecting the original company, which closed down in December last year, as the Bruce Woollen Mill Limited which resumed operations last month with 18 people on the payroll. “A number of knitters, weavers and yarn-users came to us and said, ‘We really need to keep this [factory] going because if it goes,
our businesses go’,” WEL chairman Cliff Heath told Canterbury Farming. The sorts of small business involved sell into a premium garment market which guarantees the entire product is ‘grown here, spun here and knitted here’ in New Zealand. “It’s not something with ‘Designed in New Zealand, made in China’ on it,” Heath said. Eleven small businesses own about a third of Bruce Woollen Mill, and WEL the rest. Heath said businesses of the kind involved in Bruce are vital to the industry: without them “there are no new innovative products because the people who make them are the little companies in the backyard somewhere in smalltown New Zealand.” They’ve “weathered the Asian invasion of [clothing] product, and have come out the other end with viable businesses in so much as they can put up money to invest in this,” Heath said. “They’re not struggling any more: the strugglers have gone, and the ones who are left have got strong businesses with very precise niche markets.” Bruce invoiced around $150,000 in its first month in operation, when production systems were still being ironed
out and no effort had been made to find new outlets. Heath predicted that within 12 months the company will be turning over $2m-$4m a year. “The Milton thing has seen a number of other little critical manufacturing businesses coming to us and saying, ‘Can you partner with us too?’ and we’re in the process of putting together a marketing company for all these little businesses. “We need to grow them, and they need to grow an exporting base, but most of them are too small to do it.” Applications to join with WEL in this company closed in the middle of this month, and Heath said at least 15 businesses had expressed an interest. “Effectively it’s an export co-op, with WEL as the catalyst.” WEL’s other main investment has been in Romney New Zealand’s rug-marketing venture in the United States, something Heath said is “not performing particularly well.” August will see the expiry of a two-year-long contract that WEL and Romney have had with an American marketing organisation, and the partners are preparing a replacement strategy which it expects to perform better. Meanwhile, a decision is
understood to be imminent on who the receivers of South Canterbury Finance (SCF) will sell Alan Hubbard’s former 60% holding in wool-trader and scourer Wool Services International (WSI) to. WSI is effectively owned by the Government which paid $1.6 billion into Hubbard’s doomed finance company after guaranteeing its loans in the wake of the global financial crisis. Front-runner for the WSI shareholding was thought to be Cavalier Carpets which owns the two scours in New Zealand that are not owned by WSI. A Cavalier takeover would create a scouring monopoly that has, surprisingly, already been given the green light by the Commerce Commission. Other possible buyers of WSI, which made a $6m profit last year from selling stockpiled wool into a thenbuoyant market, include
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Chinese firms which might repatriate the state-of-theart WSI scouring technology — if not the machinery — to China. WEL made an unsuccessful play for the WSI shares and, barring surprises, Heath said the company is out of that game now. “If WEL had managed to get those shares that the Government have or had, then we could have put together something that looked like Fonterra for wool.” WEL attempted to raise the $30m thought to be needed to buy the WSI shares through a float to farmers, but “farmers didn’t buy into it, so from our perspective it’s probably a dead deal. “If the Government really wanted to do something — and they could use that cornerstone ownership as a mechanism — they could reconfigure the industry,” Heath said.