Over the past year the Canterbury yarn processor has spun its own turnaround project.
Getting back on its feet to lift returns for farmers and shareholders had been the focus of NZ Yarn’s reinvention, chief executive Colin McKenzie said.
“A year ago the business was essentially broken.
“We have reinvented, repositioned and resized operations and moved from making sizeable losses to recording our first modest profit in July,” McKenzie said.
“We are looking to a promising future and that hasn’t happened by accident.
“If you are in the wool game you have got to have patience and be in for the long haul and our shareholders, particularly Carrfields Primary Wool (CP Wool) have fully understood the strategy and been very supportive and very patient as we moved through this transition.”
NZ Yarn was 42% wool grower owned by 55 farmer investors throughout the country with CP Wool holding 58%.
McKenzie said the future of NZ wool was at the very top end of the soft flooring carpet and rug market.
“You have got be in the homes of Maserati drivers and you have got to have a yarn that produces high apparent value, design and texture that is not achievable elsewhere.
“The whole strategy has been about establishing a differentiated yarn system that really makes the difference then identifying channel partners with the same vision and equipment to deliver the product to the right position in the market.
“It all takes time, 12 months from the idea to the commercialisation, so it has been a slow-moving, durable product.”
But the rewards were in sight.
With new business developments and new products NZ Yarn had gone from having one customer in the United States to eight.
“And we are in some very interesting markets with bespoke rugs, luxury broadloom and tufted woven carpet.
“We have one customer where the whole business is outfitting luxury private jets and super yachts – that’s the very top end market where NZ wool needs to be.”
As part of its resizing, NZ Yarn had transformed its large Christchurch premises into the Wool Innovation Hub incorporating its own innovative yarn business; Wool Technologies, a privately-owned business making specialist wool bedding and the CP Wool showroom floor and auction room.
Procurement and logistic activities had been relocated to Timaru, which was better placed as an epicentre for wool collection.
NZ Yarn was now half way through a $1 million capital-raise that would support further product differentiation and improve productivity and support innovation.
“It’s about funding so we can go further, faster,” McKenzie said.
The capital-raise was targeted at both existing and new farmer-based shareholding.
“We are in talks with two potentially large shareholders and hopeful of achieving the $1m target that will allow us to install equipment that will give us the ability to expand our offshore customer base.”
McKenzie said the plan was to hit the countries with the greatest opportunity and least barriers for entry.
That was predominately North America but north Asia and Western Europe, in particular Austria, Germany and Switzerland “where there is a good affinity with wool and they are affluent” were also on the radar.
NZ Yarn was about adding value not volume and could produce yarn systems that set its product apart from what anyone else in the world was doing.
Farmers would have to invest to join the ride, McKenzie said.
“There is a lot of talk out there but not enough traction.
“The ultimate solution for farmers and the wool industry is to have a raft of value-add initiatives across different markets and product sectors but we need to produce, not just tell the story.”
NZ Yarn made and marketed high-quality spun yarns that were a reflection of traditional crossbred wools grown in NZ.
While capable of producing 200,000 kilograms of yarn a month, NZ Yarn would never be able to take all NZ’s wool.
“But we will be adding value for our shareholders,” he said.
