Carpet and rug manufacturer Bremworth has reported a revenue lift in its largest market as it progresses towards a five-year strategic transformation that will see it focused on New Zealand wool and natural fibres.
Latest unaudited financial results for the six months ending December 31 2022 show a lift in revenue and gross profit for the core carpet and rug business over the first half of the year.
The company has invested in developing its brand equity, positioning itself for future growth across Australasia and has recorded an 8% sales lift in the trans-Tasman market over the period.
The revenue increase comes despite an earlier move away from low-margin, high-volume commercial business to focus on premium residential consumers.
Bremworth chief executive Greg Smith said the revenue improvement in Australia is a result of significant investments in marketing the brand, improving sustainability and investing in technology upgrades.
While the cost of investments has been reflected in a $778,000 loss for the half year, Smith said the company’s annual revenue from its core carpet business continues to grow and he is confident the longer-term outlook remains positive.
“The feedback we are getting from our trade partners and market research into consumer perceptions is that wool carpet is increasing its share of the flooring market at the expense of synthetic alternatives.
“While profitability for the half year is down on last year, there are obvious signs that the company is making significant headway in the key Australian market despite macro-economic challenges across the industry.
“The increased sales revenue is driven by the strong performance of our core carpet and rug range. Our expanded distribution and in-store presence within Australia is also coinciding with improvements in our margins.”
The company increased its inventory of finished product by 6% to more than $29 million during the period.
Increased investment in stock on hand has helped create a stronger position ahead of an expected spike in demand from North Island homeowners as a result of Cyclone Gabrielle and will cushion some of the impact of the closure to the Napier Plant in the short term.
“While the full extent of the damage to our yarn processing facility in Napier is unknown at this stage, Bremworth has advanced arrangements with both domestic and international suppliers who are prepared to step in to meet our needs while we work through the impact to our factory.”
Other results from the period show a decline in revenue and gross profit from Elco Direct, the company’s wool-buying division as the geo-political impact of the war in Ukraine and China’s zero covid policy slows global demand.
“The Elco Direct business continues to grow share of the direct-wool buying sector and this provides the Bremworth carpet business with a significant competitive advantage in our core raw material inputs,” Smith said.
“With factories in China now re-starting production, demand for NZ wool is seeing a slight recovery and we anticipate some improved operating conditions for this part of our business in the second half of 2023 as a result.”
Bremworth is also planning to introduce direct long-term contracts through its buying arm to support strong-wool farmers and ensure continuity of supply of good quality wool, with these plans scheduled for the fourth quarter.