Thursday, November 30, 2023

AWN’s purchase of NZ merino stake ‘just made sense’

Neal Wallace
Australian company’s NZM deal is ripe with synergies.
Reading Time: 2 minutes

Buying a cornerstone 10.1% stake in the New Zealand Merino Company was a logical step for Australia’s third-largest rural servicing company, it says.

AWN Rural, a privately owned company, last December bought the stake off NZ Merino’s (NZM) retiring chief executive John Brakenridge, in recognition of the synergies between the two companies.

AWN chair John Maher said his firm supplies virtually all the merino wool sourced by NZ Merino from Australian growers and the two companies also have a similar mindset about the direction the industry is headed, the approach of innovation and links through retail.

“It just made sense,” Maher said.

“John Brakenridge was departing and there was an opportunity to buy an equity stake and we believe it was a great opportunity to get closer to NZ Merino,” Maher said, pointing out the “very similar philosophy” of the two companies.

The investment has added new impetus to AWN and what the relationship can achieve for its wool growers.

“It sends a great signal about where we want AWN to go.”

Now with a seat in the board, Maher said AWN can understand where NZM is going and contribute to that.

The world’s consumers want wool that adheres to environmental, social, and animal welfare values.

Maher said the Australian wool industry has a strong long-term future but there have been some logistical issues from an increase in production, which is causing manufacturing delays due to lack of processing space.

Retail demand has been dampened slightly due to slower growth in China, but weaving demand has strengthened and benefited from post-covid spending and people returning to face-to-face meetings.

The knitting and next-to-skin-wear market has eased slightly and remains strong and Maher said long-term supply and demand is about in line with production and consumption.

Founded in 1999 as a wool marketing company, AWN has grown rapidly in the past three years through acquisitions, offering clients independent wool, livestock and property services.

Its profit has increased about 52% from 2021 to 2022 and Maher said he expects a further increase in 2023.

The volume of wool handled has grown from around 275,000 bales in 2021 to over 300,000 bales in 2022. In 2023 AWN expects to broker more than 320,000 bales.

Cattle sales increased from almost zero to 40,000 head in 2022 and in 2023 AWN expects to sell over 200,000.

Sheep sales in 2021 were just under 750,000 but grew to around 1.2 million in 2022 and are expected to reach 1.3 million in 2023.

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