NZ Merino, on quest to add value to commodities, increases annual profit 21%

Friday 16th October 2015

New Zealand Merino Co, a wool marketer which aims to develop higher-value markets for sheep products, posted a 21 percent lift in full-year profit and said it's on track to double the value of the business in the three years through 2016.

The Christchurch-based company said profit increased to $2.3 million in the year ended June 30, from $1.9 million in 2014, and $405,000 in 2013. Revenue fell 6.1 percent to $109.4 million from the year earlier, while cost of sales fell 7.7 percent to $98.4 million and expenses slid 4.2 percent to $12.8 million. It will pay shareholders, including 536 wool growers, a dividend of $1.2 million, up from $942,000 a year earlier.

Formed in 2001 to boost returns for the Merino sheep industry, the company in the past year expanded into the marketing of strong wool through a contract taking control of the wool clip of state-owned Landcorp Farming, New Zealand's largest corporate farmer. It has inked deals to supply Danish slipper company Glerups and Australian carpet market Godfrey Hirst as well as renewing contracts with UK knitwear company John Smedley, and Italian brands Cariaggi, Reda and Loro Piana at market premiums.

"We have grown our market presence with a push into the strong wool sector, and secured the continuing loyalty of our key market partners in the fine wool sector," chair Ruth Richardson said in the company's 2015 annual report. "We continually search for and deploy the ideas that allow us to secure premiums for our offerings."

The company said its joint venture with meat processor Silver Fern Farms, which markets Silere alpine origin merino meat, increased volume 10 percent from the year earlier while values rose 4.3 percent, reflecting a greater portion of the carcass being utilised in branded programmes. In the US, Silere burgers retail for more than US$15 apiece, and the brand is also sold in Dubai, Qatar, Kuwait, Hong Kong, Singapore and China, the fastest growing market.

The Silere growth was despite drought hindering the quality and quantity of lamb supply in the first half of 2015, and it said the knock-on effect to consumer confidence delayed the inking and length of a new contract.

The company has stepped back from its attempt to develop a higher value market for leather following difficulties setting up a supply chain for its Kura New Zealand Alpine Leather product.

BusinessDesk.co.nz

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