Wools of New ZealandRoadshows September-October 2013
Wools of New ZealandRoadshows April 2014
WelcomeAutumn roadshow program
6 meetings North Island6 meetings South IslandJust Mark and Ross
Spring RoadshowsIn-market presenters (like last year)more meetings/varied locations
April 2014
Mark ShadboltChairman
Wools of New Zealand
Grower Roadshow Agenda
Welcome Introduction Chairman’s commentsRoss Townshend, CEOQuestions/CommentsInformal discussion/drinks
April 2014 Mark Shadbolt, Chairman, Wools of New Zealand
CommunicatingWe’re doing our best to communicate with you
Several new initiatives in Ross’s presentation
Encouraged with growing uptake of D2S and contracts.
We’re finding that quite a few shareholders still don’t know that we are operating and that we can take all of their wool
We would like you to work on WNZ’s behalf to connect with your friends and neighbours.
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
A year old
“We got started” 25th February 2013 Capitalisation
Prospectus – Sets the Direction for five years
720 shareholders $6.05 million capital
$10 m WMDC (5 years) 14.5 million kg
Additional supporters (~300) ~5 million kg
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Vision: To be the leading innovative sales and marketing company for New Zealand strong wool
Objectives Protect and build the value of the Wools of New Zealand Brands Done
Provide the opportunity for all Strong Wool Growers Done
Provide transparent feedback to Shareholders rewarding them for delivering fit-for-purpose product to our customers Step one 2013 ….
Develop the market-pull strategy by increasing branded contracts and relationships with the supply chain Step two 2013/14 ….
Evolving within five years to be a fully commercial Grower-owned sales and marketing business Step three 2013-2018 ….
Mission: To progressively improve the profitability of our Grower Shareholders
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Key AchievementsProspectus Development – Repaid Loans
WNZ Brands / WNZ Ltd merger – protection
End of Year result – Cash result 40% of Prospectus forecast loss
On target for cash neutral position 2013/14
CEO appointed
Strategic Plan refined
Financial Management — Appointment of CFO
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Key Achievements cont’d
WMDC/WMDF: – transacting growers wool - Thank you
In-market activity: US, China, Europe – build on what’s started
Direct to market stable price contract
Camira Lambs wool contract – volume increase
Relationships: Collaboration – scours
Future shareholding: Willing buyer, willing seller
Communications – e bulletins, roadshows, media
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Financial PerformanceYE30.06.2013 YE30.06.2014
Prospectus ($1107k) $435k
Actual ($396k)
Forecast break-even
(later start from later capitalisation impact on both years)
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Now operating selling your wool
Direct to Scour
Contracts – Camira, Grentex, Laneve, more coming
Foreign exchange cover deal by deal
Good credit insurance
Well supported by ANZ bank with Trade Finance facilities and FX advice
We are “picking and choosing” the best opportunities
We are being very careful and risk averse
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Industry Co-operation
WNZ’s position is to co-operate with the wider wool industry
We have had excellent support from:
Wool Service International (WSI)
Elders Primary Wool (EPW & PWC)
New Zealand Merino (NZM)
We will continue to build positive relationships
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
But…We have been disappointed at some mis-information campaigns about WNZ, its future and its viability.
This has happened in New Zealand at farm gate level
And
It has happened in the International marketplace.
We have sought assurances that it will stop!
Farmers need to be fully involved in the supply chain.
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Trading WNZ Shares
Only a few sales so far, usually farm sales and family reorganisation.
We have engaged CooperAitken to act as a share buying and selling facilitator
There are shares for sale
You can access the share sale process at
http://www.cooperaitken.co.nz/Services/Wools-of-NZ-Shareholders
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Price Volatility
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Coarse Xbred Price Indicator (NZ$)
Price Volatility
Mark Shadbolt, Chairman, Wools of New ZealandApril 2014
Stable Price MechanismCost of Production (Shadbolt)Xbred Wool Indicator
Market Pull Strategy
April 2014 Mark Shadbolt, Chairman, Wools of New Zealand
Ross TownshendChief Executive
Wools of New Zealand
The Problem?60 years ago, 85% of a sheep farmer’s revenue was from wool and 15% from meat
Now the complete inverse is true
We want to bring up wool returns to >30% in a 5 year timeframe
We’ve lost some wool growing skills, wool harvesting skills and wool genetics = Loss of confidence
We’ve lost stock numbers – and they’re not coming back
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Comparative ReturnsA dairy farmer gets ~80% of the wholesale returns for their product
A red-meat farmer gets ~50% of wholesale returns
A wool grower gets ~20% of wholesale returns
Yet
Dairy is the most capital/energy/environment intense
Wool is the least capital/energy/environment intense
But wool has the most convoluted value chain
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Market Price Variability
Whole milk powder sells for USD5000/MT and is rarely offered outside a $50/MT band = 1%
Manufacturing beef rarely sells outside a band of +/-2USc/lb = 1% on USD2.00/lb
Wool is often offered by a range of NZ exporters in a +/-15% range
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
The Problem?The Wool industry destroys value at the sales end with multiple offerings of undifferentiated wools in a “race to the bottom”
Example: 7 bids, UK customer, basic slipe woolGBP3.40 to 2.90/kg50p difference = $1/kgre-sets buyers price expectation (lower)mid point price effect NZ$6M on 12M kg
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Route to MarketDairy: Well established customer base + GDT, now with
~1000 bidders- Leads to “Price Discovery”
Beef/Lamb: Established disciplined commodity markets, integrated procurement, slaughter, by-products and sales
Some good established consumer positionsWool: Auction system that allows (a very small group of)
traders to take a position with no thought for the true market price
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
DifferentiationDairy: NZ global reputation for quality, technology
and reliable supplyMeat: NZ Lamb well established and differentiated
some success at grass-fed appellationplenty of lean (bull) grinding beef
Wool: Only 3 brands of significance- Wools of New Zealand [Fern brand]- Laneve [fully traceable - WNZ
owned]- Just Shorn [Elders Primary Wool]
Rest is “white and fluffy” commoditynotable step down in wool quality
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
We are developing New Ways
Direct to Scour (D2S)Contracts Camira
GrentexLaneveMore to come in 2014
Other new optionsStrong Bright and White
Key Tradeshow learningApplicable for hand-tufting in China
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
WNZ Route to MarketWNZ has brands, in-market presence and ~100 Premier Partners unique
WNZ co-brands with many “big name” carpet and textiles makers in UK, Europe and USA unique
Partners network include spinners, dyers, weavers, carpet makers right through to wholesalers and retailers unique
WNZ brands are not well known at home in NZ, but very well respected unique
- Laneve is the only traceable wool brand globally- huge uptake in UK, some in Europe, just launched in USA in Jan 2014
- generates real value- price discovery
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
WNZ Points of Difference* indicates Unique to WNZ
• Traceability*• Product development*• Style*• Colour *• Design*• Sampling*• Technical support*• Sales strategies*• Market support programmes*• Wool Supply
April 2014
April 2014
GRO
WER
S
SCO
UR
EXPO
RT
SPIN
NER
MAN
UFC
TURE
R
WHO
LESA
LE
RETA
IL
CON
SUM
ERS
DYERDIRECT
INTEGRITY AND TRACEABILITY
NZWSI GRENTEX SYD WHITEOAKWNZ
PREMIER PARTNERS
TRANSPARENT FEEDBACK LOOP
WNZ
Market Pull Strategy
Ross Townshend, Chief Executive, Wools of New Zealand
Camira Lambswool ContractCamira Fabrics is a Huddersfield MBO textiles business of competence, focussed on transport and office fabrics
Vertically integrated with spinning, dying, knitting, weaving, piece-work etc.Blazer is an office fabric that is a runaway success
- Co-branded as Laneve- traceable, pesticide free, low VM, EU Eco-label- 400000kg for 2014, ~500000kg for 2015 - partnership that we expect to rollover in July 2014 for
2015 supply on SPM terms- Exploring other opportunities with Camira
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Value in Camira ContractsCurrent spot LW price: $5.10/kg cleanCamira contract price: $6.25/kg for 0.0% VM
$6.10/kg for 0.1% VM (limited)$6.00/kg for 0.2% VM (some)
D2S logistic model saves >13c/kgTotal price advantage ~$1.30/kg ButDeferred payment terms:
20% 60 days, 60% 30 Nov, 20%, 28 Feb
Matches Camira demand with NZ farm supply (12 + 4 = 16 mths)
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Why Deferred Terms?Most wool harvested January 2014 to April 2014
Supply from April 2014 to March 2015
Camira pays on 30th Month following delivery (Last 03.04.2015)
400,000kg wool @ $6.25/kg = $2.5M (+costs ~$600k)
Trade off: better market returns = slower/later payments
Full market transparency
Good but new relationship with ANZ Bank
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Grentex Carpet ContractMumbai based, family owned, wool spinner
WNZ Premier Partner, supplying Laneve yarn to:
Southern Yarn Dyers (Atlanta, GA – WNZ Premium Partner) who dye yarn for:White Oak Carpet (Wichita, KS – WNZ Premium Partner) who make the USA launch Laneve carpet
First step in a multi-step value chain – glued together by Laneve brand
Grower uptake low
Colour spec (y-z = 0) too tight for many growers
Colour flexibility from Grentex from visit in March
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Laneve Carpet Contract
Similar to Grentex contractDirect result of Trade Show presence
trial Laneve supply CanadaRomaniaItalyBelgium (tbc)Turkey (tbc)
Less tight colour spec (y-z <2.5)$4.85/kg (clean)Uptake so far = modest.
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Direct to ScourPartnership with Wool Services International – learning curve
Uses Wool Logistics as a freight broker – some issues
Conventional broker model costs 26c to 30c/kg
D2S all inclusive cost 13c/kg
Net saving >13c/kg – not huge but worth having : $2730 for average supplier (21,000kg)Almost equates WMDC deduction, 26% return on initial capital
“Top End” wool collected for WNZ contracts
All “other” wool priced by WSI against objective tests
Grower’s decision to accept the WSI price
Payment in 7-10 days
Doubled every month since October (290T in Feb 14)
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
D2S Volumes
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 -
50,000
100,000
150,000
200,000
250,000
300,000
350,000
10,929 19,722 24,765
62,860
131,936
294,295 300,000
Direct to Scour (WSI) - weight
Date
Grea
sy K
g's
est
Everyone Hates Volatility
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
0
100
200
300
400
500
600
700
Coarse Crossbred 2011-12Coarse Crossbred 2012-13Corase Crossbred 2013-14
Sale week Jun-JulSource: NZ Wool Services International
c/kg
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
WNZ Approach to Longer Term Pricing
Everyone in the wool value chain seeks less price volatility
Price upside volatility risks swap to synthetics – never comes back
Most people are prepared to trade some price for less volatility
WNZ seeks to build enduring roll-over type relationships
Development of the Stable Pricing Mechanism (SPM)
Our customers like this and we have it running off-shore
WNZ seeks to build back-to-back supply on the SPM – by contractRoss Townshend, Chief Executive, Wools of New ZealandApril 2014
Stable Price Mechanism• Operating for 2½ years, 4 periods with 5th committed
• Being rolled out for Camira 2015 supply contract
• Nice and simple
• Relies only on 2 independent indices CCWI and PPI
• Allows two way equal gain-share
• Widely road-tested with customers – acclaim
• Now seeking Growers support at April Roadshows
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Dead Band+ 5%Base Price
CCWI Market movement +ve
50% gain share +ve
CCWI Market movement -ve
50% gain share -ve
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
• Price increase during Year 1• 50% +ve gain share sets base price for Year 2 (+ PPI)• Price decreases during Year 2• 50% -ve gain share sets base price for Year 3 (+ PPI)
Year 1
Year 2
Year 3
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
+ 5%Base Price
Major movement dead band
50% gain share +ve
Major movement dead band
50% gain share -ve
1. A ‘major movement dead band’ also needs to be created/agreed.2. At the upper end, WNZ needs to be able to renegotiate to be certain that it can source wool for the
customer.3. At the lower end, the customer needs to be insulated from paying an excessive price relative to open
market.4. The MMDB is set at two levels
a) +/- 20% when the impacted party is entitled to initiate discussion (Yellow card)b) +/- 25% when the SPM is suspended (Red card)
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
CommunicationOur “Achilles Heel”
Fortnightly E-bulletinOnly ~40% of E-bulletins are openedMany email addresses change – update pleaseSome carriers drop off attachments
Mail out to non-E mail people
Feedback on communications would be good
Opening would be great
Reading would be better still
Acting on contracts and options would be superb
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
WNZ Approach to Grower Relations
Roadshows – Autumn and SpringE Bulletins – low penetrationNew appointments
Supplier Relations Manager (0.5FTE)
3 Supplier Liaison Officers (0.3FTE)
Grower Advisory Panel (GAP)15 to 20 noted growerstest panel for new ideas
Open and accessible Board and Executive
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Trial with Hazlett Rural
Canterbury roll-out trial with “new generation” farm support company
“Clip on” to other farm services
Potential roll-out in other areas
Don’t want our own field force(duplication and cost)
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
Questions?
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014
14th March 2014 Ross Townshend, Chief Executive, Wools of New Zealand