Growers back wool merger
Woolgrowers have almost unanimously voted in favour of the proposed merger of Wools of NZ (WNZ) and Primary Wool Co-operative- owned CP Wool (CPW).
Formerly Elders Primary Wool and taking on its new name just this week, CP Wool has a great team of people and is enjoying a momentum which in turn creates excitement, says Gardner.
“You have to have confidence in the wool industry. When you look at recent trends in wool production levels and where the prices are right now the industry is in a more positive mood.” Reflecting on the industry, Gardner says you should not get carried away, but it has just spiked again for the second time in four year. “The last two years have been particularly stable, with much improved returns,” he says.
The Just Shorn retail (wool carpet and rugs) brand has rolled out across North America and more recently in Australia. It will be rolled out in New Zealand this month through the Harrisons Carpet One nationwide. “This will be particularly exciting for the team and many of our growers and co-op members have been looking forward to this for some time.”
Elders Primary Wool took a majority share in Christchurch spinning mill NZ Yarns and bought it out of voluntary receivership in December. The mill spins yarn mostly for carpet and wool manufacture, largely in Australia and some in the US.
“We are working to diversify the product and get more product into some niche manufacturers in the US,” says Gardner. “We are a majority shareholder in NZ Yarn so that is another example of the vertical integration approach across the wool supply chain, given we are talking with both retail and the manufacturing sector.
“We have a significant governance role in NZ Yarn. We are trying to ramp up production and re-establish its credibility in the industry.”
It is the only yarn mill of any significance left in NZ and the downstream manufacturers are recognising that, he says. It also makes yarn for the Just Shorn brand, under an exclusive agreement with CP Wool for significant volumes. It’s a direct line to the manufacturing sector, so it is a very strong business model.
Most of the manufacturers they work with for NZ Yarn are in Australia. They are working hard to expand their horizons and rebuild relationships with the US. “There is big potential there.”
Gardner says former chairman and Elders NZ managing director Stu Chapman has done a good job of establishing relationships in the US and Australia and strong links with China.
“Any business is a relationship business and we’ve built that to a level where we’ve got credibility; we’re using that base level to turbo-charge this operation.”
CP Wool has just secured the services of a wool exporter to China, providing the opportunity for contracts to growers. “A lot of growers are looking for more certainty about their budgeting, and contracts are much more of a focus than they used to be. Having our own export arm is providing a significant opportunity there.”
Primary Wool Cooperative is a 50% owner of CP Wool; it has 1200 members and the client list is about three times that number.
“We’ve got a reasonably strong reach into the wool growing fraternity and that’s been building nicely over the last few years,” Gardner says.
The NZ wool industry is still over-serviced, he says. “We’ve got an opportunity with our momentum, our team and our strategic plans to consolidate the industry further, by acquisition or merger, so there are opportunities for consolidation. But it’s easier said than done.
“I have been a Farmlands director for 20 years and in the wool industry for the same time so I have been through my share of mergers and acquisitions; so it’s easy to say, not so easy to deliver. But it does need to happen.”
A man of the land
Howie Gardner has been a director on “some entity or another” for more than 20 years.
The third generation South Otago farmer is a Farmlands director but will step down shortly.
He is a member of the Primary Wool Cooperative which is a 50% owner of CP Wool, and he was instrumental in the development of its Just Shorn brand and a board member of Elders Primary Wool until taking up the chairmanship.
He replaces Stu Chapman, who also stepped down as Elders NZ managing director last month.
The Garners have a 1550ha sheep and beef farm near Balclutha of which 1150ha is effective. There is a fair amount of bush and production forestry. They run 12,000 stock units; just over 90% is Perrendale sheep, and they run a Perrendale stud flock.
