Further Efficiencies For The New Zealand Wool Industry

Media Release

9 February 2011

Further Efficiencies For The New Zealand Wool Industry

New Zealand’s largest wool scourer, Cavalier Wool Holdings (CWH) has filed an application to the Commerce Commission to acquire shares in or assets of New Zealand Wool Services International Limited (NZWSI). If successful the CWH and NZWSI scouring operations will merge, moving to CWH’s existing facilities in Napier and Timaru.

The proposed acquisition is another in a long line of scouring industry rationalisations made over the past 20 years in an effort to provide appropriate scouring capacity to the reducing size of the national sheep flock.

CWH believe the merger benefits will assist the long awaited wool industry restructure that was highlighted in the Minister of Agriculture and Forestry’s recently published Wool Industry Taskforce report.

Merger benefits include the potential to drive efficiency, reduce costs and remain competitive with offshore wool processing; retain wool scouring and scoured wool blending capability onshore and under New Zealand ownership; assist with a structural solution to the fragmented wool industry and pave the way for introducing the ‘super store’ wool handling facility to streamline the supply chain providing a clear line of sight between wool farmers and customers; offer benefits to wool farmers, merchants, brokers and exporters, and help position New Zealand’s wool industry to compete in a global market.

“CWH has undertaken considerable merger activity in the past 10 years to preserve the scouring sector in New Zealand with seven successful mergers completed. We are confident the previous mergers have contributed to structural improvements in the wool sector and we are proud of these achievements,” says Nigel Hales, CEO of CWH.

“The scouring industry has a counter intuitive factor to it, where inactivity leads to scouring price increases while mergers hold or reduce prices. This is achieved through increased efficiencies which spread the costs of scouring over larger wool volumes. The merger will create the same positive outcomes as previous CWH mergers by maintaining price efficiency for wool farmers and exporters, particularly in the face of cost increases from its own suppliers in energy and wage increases, and the introduction of the ETS charge this year.”

“We have significant past experience in leading merger activity within the scouring industry to gain greater cost efficiencies and to increase the sector’s global competitiveness. Without a national competitive platform, our scouring sector will end up depleted of domestic scouring capability as is the situation in Australia,” says Mr Hales.

While CWH is the major player in New Zealand’s scouring industry, the industry competes with the growing scouring industry in China, which now represents half of the world’s wool imports.

“CWH enjoys a relatively neutral stance in the wool industry and looks forward to working with all participants for greater industry good. It is our aim to ensure New Zealand continues to be a world leader in the growth, production and sale of high quality wool. The merger of CWH and the NZWSI scouring operations will continue to support and enhance the New Zealand wool industry,” says Mr Hales.

Ends.

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