Rampant dollar hits wool earnings

The largest New Zealand-owned exporter of greasy and scoured wool, Wool Services International (WSI), is disappointed that it has posted a profit of only $127,000 for the six months to December, compared with a $1.07 million profit previously.

"This is a disappointing performance," company chairman Pat Morrison told the stock exchange yesterday. WSI is listed on the exchange's New Zealand Alternative Market.

WSI reported an after-tax profit of $3.28 million for the last full year to June 30, down 8.7 per cent on the previous year's record.

The company said its total operating revenue for the latest six months dropped 10 per cent to $60.5 million (down from $67.2 million previously).

Its operating surplus before tax fell 83.2 per cent to $299,000 ($1.7 million) and the tax it paid on this fell similarly to $99,000 ($517,000).

After tax and $73,000 ($195,000) in payments to minority interests, the company was left with $127,000 in net operating surplus.

The company's statement said a 13 per cent rise in the exchange rate of the dollar against the greenback - since the financial year started on July 1, 2004 - "had a negative impact on our stocks".

Delays in commissioning the new Whakatu wool scour also had a disruptive effect.

"Additional costs incurred in financing the new plant in advance of its commissioning have been a drain on the financial performance," Morrison said.

"Additionally, the movement of wool between [North and South] Islands because of this delay has been a costly exercise".

WSI and scouring partner Dalewool Holdings last year began a comprehensive upgrade of their jointly-owned plant at Whakatu, to bring it into line with its sister plant at Kaputone.

"While this upgrade has largely been completed, commissioning has been delayed due to the late delivery of the high-density press from Italy," Morrison said.

Commissioning the Whakatu plant was not now expected until next month, which would continue to disrupt the production capacity of the company over the next few months.

"Benefits from the new plant will not be felt until late in the 2004-2005 financial year."

Last year WSI consolidated its share register by buying back the stakes of shareholders with less than 1000 shares.

- NZPA

Unravelling

Factors to impact negatively included:

* A 13 per cent rise in the dollar to the greenback.

* Delays to a scouring plant.

* Moving wool between the islands had been costly.