Thursday, July 7, 2022

Proposal to buy more wool direct

New Zealand Wool Services International (WSI) will increase the volumes of wool it buys directly from farmers.

From current levels of buying 50% to 52% of its requirements at auction, the company plans to reduce this to about 40%, with the balance bought directly on-farm, managing director Michael Dwyer said after the annual meeting.

The company is New Zealand’s biggest buyer of wool at auction.

“There would be savings for both farmers and the business in transferring wool direct from farm to scour,’’ Dwyer said.

Earlier, he told shareholders that a new approach to procurement was overdue. “WSI will be offering a number of interesting options which we believe will prove attractive and rewarding to grower suppliers.’’

The scheme will be researched and costed over the next few months before details are announced next year.

WSI is under a takeover offer from Australian company Lempriere, and Dwyer said profit forecasts are the same now as he made to the independent adviser who reported to shareholders on the merits of the offer.

This was that “while the profit is down on the same period for last year, improved results are expected for the remainder of the current financial year and a tax paid profit in the range of $1 million should be achieved for the first six months trading to December 31”.

If the takeover is completed, these earnings will accrue to the new owner.

This raised the hackles of shareholder Michael Mellon, who supports the takeover but told the meeting that it didn’t make sense for WSI’s accrued tax imputation credits of about $1 million to be lost into "thin air''.

“These credits are the property of shareholders, and under tax laws will be lost to us. I’d hate to see them lost.’’

He asked chairman Derek Kirke to ask Lempriere to provide a waiver of its takeover conditions, so that WSI could pay a 1.5c a share dividend and use up the credits.

Mellon later amended this to a 1c figure after WSI finance director Geoff Deakins said the company had received some tax refunds since the 2012 June balance date, and the imputation credit figure was now closer to $700,000.

Kirke said other shareholders had also mentioned this issue to him, but Lempriere had given a very short answer when the idea was put to it.

Lempriere spokesman Tony McKenna told Mellon that he had argued a persuasive case, but the 45c a share takeover offer was considered “very full and fair value’’.

“Our offer is based on the value we see there, and that doesn’t include any dividend.’’

This annual meeting would be the company’s last if the conditions attached to the takeover offer were met, Kirke told shareholders. Ownership issues meant the last three years had been exceptionally busy for the board and management, involving a lot of effort and expense which had added no value to the company.

If the takeover proceeded, directors believed the company would be even more successful with a well-resourced single owner.

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