NZ Wool Industry: Cost of cutting surplus scouring capacity highlighted
December 7th, 2009
The wool industry may have taken a battering in recent years but leading exporter Wool Services International (WSI) is predicting brighter times ahead. MD Michael Dwyer says “going on recent events there is definitely a recovery occurring in the wool industry and this will impact favourably on WSI both in scour processing and trading.” He further predicts China and India will recover more quickly than so-called older economies in Europe and the US as the trend continues for manufacturing to migrate east.
In the meantime though the industry is still suffering fallout from current sector conditions. WSI took a $3.2m hit for the cost of closing scouring plants, part of the national effort to shrink capacity to the actual size of demand, resulting in a $4.4m loss. Shares in the public company, mirror the tough trading conditions – they’ve sunk more than 60% on the NZAX market so far in 2009. Dwyer notes “rationalisation of wool scours is a positive step but much more needs to be done to rejuvenate the industry,” A collapse in wool prices, coupled with “major fluctuations” in the exchange rate and defaults on contracts have eroded returns.
He adds so far in the current financial year, residual effects of the global downturn have resulted in trading conditions which are “the most difficult we have experienced,” including a currency which has defied gravity. Dwyer is predicting an improvement in the second half, typically a busier period, resulting in a “satisfactory outcome” for profitability.
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