Thursday, July 7, 2022

Outgoing WRONZ chairman says plan close to fruition

Commercialisation is likely in April for the first of several wool-based projects financed in a joint Government, industry-good, and company programme.

It won’t be quite in time for WRONZ chairman David Douglas to celebrate in the role, which he steps down from next month, but he is happy with the progress being made.

“This project, and others being worked on, is expected to use significant volumes of wool and create significant value, and that was our objective,’’ he said.

Information around the projects has been kept confidential since the programme began two years ago and details won’t be released till they reach a commercial stage.

The only way the programme was going to be supported by the businesses needed to help lift the demand for and value of crossbred wool was to ensure that they could operate in confidence, Wool Industry Research Ltd (WIRL) general manager Ian Cuthbertson said.

The programme set up two types of investment, one for company specific projects, with a minimum 30% funding by the company, where it gets to keep the IP when commercial targets are met, and an industry good grouping, which WIRL funds 100% and retains the IP created.

By February, the scheme will have been operating for two years, with another three years to go. So far $8.4 million of the overall $15m to be allocated has been committed, though not all of this has been spent. As a guide, the project due to be commercialised in April allowed for total spending up to $1.9m, though the actual amount might be closer to the $1.4m to $1.5m range.

The spend tally is due to be $3m a year – with $1m from WRONZ and $500,000 from the companies, with the balance provided dollar for dollar by the Government through the new Ministry for Business, Innovation and Employment (MBIE), with the programme administered by WIRL.

There are 11 company specific projects at this stage and seven are classed as industry good.

After a slow start for company contributions, the interest now is potentially above the annual target figure.

The WIRL board was meeting last week to consider new applications involving another $4m of funding.

The focus is on new products, outside of the dominant carpet use for cross-bred wools, and attracting companies which may not have previously been part of the wool industry. “We want wool in places it hasn’t been seen before,’’ Cuthbertson said.

WRONZ has paid Fahrenheit $1m for coming up with four ideas which can be taken forward to commercial development by New Zealand companies. 

Three of those four ideas are being followed through – in bedding, apparel and beauty care. One for baby/child care is not being progressed at this point.

Fahrenheit is a New York company headed by New Zealander Geoff Vuleta, whose brief was to come up with projects which on their own could use up to 10% of the wool clip and/or bring in another $50m of wool export receipts.

Most of Fahrenheit’s return was to be through a bonus based on results, but this was renegotiated because the arrangement came to be seen as an obstacle for the industry. The $1m now makes up most of its fee, and the bonus payment will be lower.

“Fahrenheit has done everything we’ve asked of it, and the opportunity is now there for industry,’’ Douglas said.

Though retiring as chairman in December to focus on his substantial farming interests in North Otago, he will stay on the board until elections next year,

He will leave WRONZ with a $32m diversified investment portfolio, producing the income from which it funds post-farm wool research. Much of the capital came from selling research buildings at Lincoln in Canterbury and sale of research property in Yorkshire in the UK.

WRONZ had adopted a minimal risk investment approach, while at the same time achieving sufficient income to retain the spending power of the capital, administration manager Al Boa said.

As well as the capital fund, WRONZ has a small charitable trust with close to $3m in funds from which it funds research scholarships.

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