Thursday 27th September 2018
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Cavalier Corp is close to selling its stake in New Zealand’s only wool scourer as part of a plan to reduce debt and free up capital to invest in carpet manufacturing.
The firm owns 27.5 percent of Cavalier Wool Holdings, alongside global giant Lempriere Wool, Accident Compensation Corp and Direct Capital. The scourer, known as CWH, operates plants in Napier and Timaru with a combined capacity of 100 million kilograms annually.
Cavalier said it will receive about $13.5 million in cash from the sale. The transaction will also result in a non-cash write-down of almost $12 million on its equity in CWH and its half stake in a property company with leases to the scouring business.
Chief executive Paul Alston said the firm was approached by an experienced investor in wool scouring and its partners had all agreed to accept the offer. Lempriere-owned Scouring Investments will retain a 30 percent stake.
Cavalier will also enter into a long-term agreement with CWH to ensure ongoing access to scouring services on arm’s length commercial terms.
“We do not believe it is essential to own scouring infrastructure to secure the supply of scoured wool,” Alston said. “The sale proceeds will significantly reduce our debt and strengthen our balance sheet, enabling us to explore investments in our core business of manufacturing and marketing high-end carpet solutions.”
Cavalier, which has sales offices throughout New Zealand and Australia, has halved its debt in the past four years. It undertook a major consolidation of its manufacturing plants in 2016 to improve profitability and is ramping up its export focus to expand significantly beyond Australasia.
Its operating earnings climbed to $10.3 million in the June year, from a $2.2 million loss the year before when the firm incurred $6.3 million of restructuring costs. Debt at June 30 was $29.4 million, down from $40.2 million a year earlier.
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