Roadshows SeptemberOctober 2013 Wools of New Zealand Roadshows April 2014 Welcome Autumn roadshow program 6 meetings North Island 6 meetings South Island Just Mark and Ross Spring Roadshows ID: 327947
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Slide1
Wools of New Zealand
Roadshows
September-October 2013
Wools of New Zealand
Roadshows
April 2014Slide2
Welcome
Autumn roadshow program
6 meetings North Island 6 meetings South Island Just Mark and RossSpring Roadshows In-market presenters (like last year) more meetings/varied locationsApril 2014Slide3
Mark Shadbolt
Chairman
Wools of New ZealandSlide4
Grower Roadshow Agenda
Welcome
Introduction Chairman’s commentsRoss Townshend, CEOQuestions/CommentsInformal discussion/drinks
April 2014
Mark Shadbolt, Chairman, Wools of New ZealandSlide5
Communicating
We’re doing our best to communicate with you
Several new initiatives in Ross’s presentationEncouraged 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 woolWe would like you to work on WNZ’s behalf to connect with your friends and neighbours.
Mark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide6
A year old
“
We got started” 25th February 2013 CapitalisationProspectus – 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 Zealand
April 2014Slide7
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 Zealand
April 2014Slide8
Key Achievements
Prospectus Development – Repaid Loans
WNZ Brands / WNZ Ltd merger – protectionEnd of Year result – Cash result 40% of Prospectus forecast lossOn target for cash neutral position 2013/14CEO appointedStrategic Plan refined Financial
Management — Appointment of CFOMark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide9
Key Achievements cont’d
WMDC/WMDF:
– transacting growers wool - Thank you In-market activity: US, China, Europe – build on what’s startedDirect to market stable price contractCamira Lambs wool contract – volume increaseRelationships: Collaboration – scoursFuture shareholding:
Willing buyer, willing sellerCommunications – e bulletins, roadshows, mediaMark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide10
Financial Performance
YE30.06.2013 YE30.06.2014
Prospectus ($1107k) $435kActual ($396k)Forecast break-even(later start from later capitalisation impact on both years)
Mark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide11
Now operating selling your wool
Direct to Scour
Contracts – Camira, Grentex, Laneve, more comingForeign exchange cover deal by dealGood credit insuranceWell supported by ANZ bank with Trade Finance facilities and FX adviceWe are “picking and choosing” the best opportunitiesWe are being very careful and risk averse
Mark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide12
Industry Co-operation
WNZ’s position is to co-operate with the wider wool industry
We have had excellent support from: Wool Service International (WSI) Elders Primary Wool (EPW & PWC) New Zealand Merino (NZM)We will continue to build positive relationships
Mark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide13
But…
We have been disappointed at some
mis-information campaigns about WNZ, its future and its viability.This has happened in New Zealand at farm gate levelAndIt has happened in the International marketplace.We have sought assurances that it will stop!Farmers need to be fully involved in the supply chain.
Mark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide14
Trading WNZ Shares
Only a few sales so far, usually farm sales and family reorganisation.
We have engaged CooperAitken to act as a share buying and selling facilitatorThere are shares for saleYou can access the share sale process athttp://www.cooperaitken.co.nz/Services/Wools-of-NZ-Shareholders
Mark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide15
Price Volatility
Mark Shadbolt, Chairman, Wools of New Zealand
April 2014
Coarse
Xbred
Price Indicator (NZ$)Slide16
Price Volatility
Mark Shadbolt, Chairman, Wools of New Zealand
April 2014Slide17
Market Pull Strategy
April 2014
Mark Shadbolt, Chairman, Wools of New ZealandSlide18
Ross Townshend
Chief Executive
Wools of New ZealandSlide19
The Problem?
60 years ago, 85% of a sheep farmer’s revenue was from wool and 15% from meat
Now the complete inverse is trueWe want to bring up wool returns to >30% in a 5 year timeframeWe’ve lost some wool growing skills, wool harvesting skills and wool genetics = Loss of confidenceWe’ve lost stock numbers – and they’re not coming back
Ross Townshend, Chief Executive, Wools of New ZealandApril 2014Slide20
Comparative Returns
A dairy farmer gets ~80% of the wholesale returns for
their productA red-meat farmer gets ~50% of wholesale returnsA wool grower gets ~20% of wholesale returnsYetDairy is the most capital/energy/environment
intenseWool is the least capital/energy/environment intenseBut wool has the most convoluted value chain
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide21
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/lbWool is often offered by a range of NZ exporters in a
+/-15% range
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide22
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 wool GBP3.40 to 2.90/kg 50p difference = $1/kg re-sets buyers price expectation (lower) mid point price effect
NZ$6M on 12M kg
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide23
Route to Market
Dairy:
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 Zealand
April 2014Slide24
Differentiation
Dairy:
NZ global reputation for quality, technology and reliable supplyMeat: NZ Lamb well established and differentiated some success at grass-fed appellation plenty 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” commodity
notable step down in wool quality
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide25
We
are developing New Ways
Direct to Scour (D2S)Contracts Camira Grentex Laneve More to come in 2014Other new optionsStrong Bright and White Key Tradeshow learning Applicable for hand-tufting in China
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide26
WNZ Route to Market
WNZ has brands, in-market presence and ~100 Premier Partners
uniqueWNZ co-brands with many “big name” carpet and textiles makers in UK, Europe and USA uniquePartners network include spinners, dyers, weavers, carpet makers right through to wholesalers and retailers uniqueWNZ 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 Zealand
April 2014Slide27
WNZ Points of
Difference
* indicates Unique to WNZTraceability*Product development*Style*Colour *Design*Sampling
*Technical support*Sales strategies*Market support programmes*Wool Supply
April 2014Slide28
April 2014
GROWERS
SCOUR
EXPORT
SPINNER
MANUFCTURER
WHOLESALE
RETAIL
CONSUMERS
DYER
DIRECT
INTEGRITY AND TRACEABILITY
NZWSI
GRENTEX
SYD
WHITEOAK
WNZ PREMIER PARTNERS
TRANSPARENT FEEDBACK LOOP
WNZ
Market Pull Strategy
Ross Townshend, Chief Executive, Wools of New ZealandSlide29
Camira Lambswool Contract
Camira 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 Zealand
April 2014Slide30
Value in Camira Contracts
Current 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 FebMatches Camira demand with NZ farm supply (12 + 4 = 16 mths)
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide31
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 paymentsFull market transparency
Good but new relationship with ANZ Bank
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide32
Grentex Carpet Contract
Mumbai 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 carpetFirst step in a multi-step value chain – glued together by Laneve brandGrower uptake lowColour spec (y-z = 0) too tight for many growers
Colour flexibility from Grentex from visit in March
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide33
Laneve Carpet Contract
Similar to Grentex contract
Direct result of Trade Show presence trial Laneve supply Canada Romania Italy Belgium (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 Zealand
April 2014Slide34
Direct to Scour
Partnership with Wool Services International – learning curve
Uses Wool Logistics as a freight broker – some issuesConventional broker model costs 26c to 30c/kgD2S all inclusive cost 13c/kgNet 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 Zealand
April 2014Slide35
D2S Volumes
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014
estSlide36
Everyone Hates Volatility
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide37
WNZ Approach to
Longer Term Pricing
Everyone in the wool value chain seeks less price volatilityPrice upside volatility risks swap to synthetics – never comes backMost people are prepared to trade some price for less volatilityWNZ 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 contract
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide38
Stable
Price
MechanismOperating for 2½ years, 4 periods with 5th committedBeing rolled out for Camira 2015 supply contractNice 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 Zealand
April 2014Slide39
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 Zealand
April 2014Slide40
Price increase during Year 1
50% +ve gain share sets base price for Year 2 (+ PPI)
Price decreases during Year 250% -ve gain share sets base price for Year 3 (+ PPI)
Year 1
Year 2
Year 3
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide41
+
5%
Base Price
Major movement dead band
50% gain share +ve
Major movement dead band
50% gain share -ve
A ‘major movement dead band’ also needs to be created/agreed.
At the upper end, WNZ needs to be able to renegotiate to be certain that it can source wool for the customer.
At the lower end, the customer needs to be insulated from paying an excessive price relative to open market.
The MMDB is set at two levels
+/- 20% when the impacted party is entitled to initiate discussion (Yellow card)
+/- 25% when the SPM is suspended (Red card)
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide42
Communication
Our “Achilles Heel”
Fortnightly E-bulletin Only ~40% of E-bulletins are opened Many email addresses change – update please
Some carriers drop off attachmentsMail 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 Zealand
April 2014Slide43
WNZ
Approach
to Grower RelationsRoadshows – 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 growers test panel for new ideasOpen and accessible Board and Executive
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide44
Trial with Hazlett Rural
Canterbury roll-out trial with “new generation” farm support company
“Clip on” to other farm servicesPotential roll-out in other areasDon’t want our own field force
(duplication and cost)Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide45
Questions?
Ross Townshend, Chief Executive, Wools of New Zealand
April 2014Slide46
14th March 2014
Ross Townshend, Chief Executive, Wools of New Zealand