Wednesday, April 24, 2024

NZ Merino Co puts halt on dividend

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Tough market has wool firm doing battle with rising costs.
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The New Zealand Merino Company has put a halt on paying a dividend this year, saying it would not be “prudent” given market conditions.

Global economic conditions and inflationary pressures affected the Christchurch-based, USX-listed wool marketer’s results, which saw a “significant” lift in its cost base in the year to June 30.

During the 12-month period, long-time chief executive and co-founder John Brakenridge announced his resignation, with AWN Rural Pty Limited taking his 10.1% stake in the business for $9.50 a share.

Angus Street, chief executive of Australian agtech business AuctionPlus, was named his replacement.

The company reported earnings before interest and tax (EBIT) of $4.3 million – at the lower end of the guidance given at the end of July and a decrease of 38% on last year.

The EBIT also included provisions and expenses of $1.3m for share-based arrangements, including non-cash expenses and one-off costs of $800,000 with the transition to a new chief executive.

Interest costs for the year were $1.2m, which it described as “significant”, driven by increased periods of stock holdings in line with shifts in brand partner requirements, the resulting deferral of some deliveries, and a “substantial” lift in interest rates.

Those deferrals of deliveries negatively affected operating cashflows, the company said.

 New Zealand Merino Company (NZMC) reported a net profit of $1.7m – a decrease of 61% on the previous year.

The company said that given the impact of market conditions, the board decided it was not “prudent” to pay a dividend “at this time”.

Last year, NZMC paid a dividend of 41.6 cents per share.

The number of bales sold for the year increased by 11,000 or 9%, with growth in fine-wool and strong-wool volumes.

Fine wool volumes increased by 6,000 bales, 8%, to 85,000 bales, while strong-wool volumes increased by 5000 bales,10%, to 62,000 bales.

NZMC said it “deliberately” slowed its grower procurement in the last quarter to ensure an alignment between supply and demand – which it expected to continue for at least the first half of the financial year.

“Strong-wool bale volumes were impacted by the after-effects of Cyclone Gabrielle, which resulted in a large number of bales being held up due to shearing, transport and logistics delays.”

Total operating revenue was $171m, a 13% decrease from the previous year. Gross profit was $21.6m.

NZMC said its capital raise two years ago and strong results in recent years continued to underpin the group’s financial strength.

The company expected the slowdown in consumer demand would continue throughout the year, affecting its growth expectation.

“Additionally, as with most businesses at the moment, we are experiencing very significant cost increases. We are very focused on mitigating as much of these impacts as possible.”

It expected EBIT for the year to be in the range of $4.5m to $5.1m

The company said a key focus for the year would be improving the liquidity of NZMC shares.

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