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Wools of New Zealand Roadshows September-October 2013 Wools of New Zealand Roadshows April 2014.

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Presentation on theme: "Wools of New Zealand Roadshows September-October 2013 Wools of New Zealand Roadshows April 2014."— Presentation transcript:

1 Wools of New Zealand Roadshows September-October 2013 Wools of New Zealand Roadshows April 2014

2 Welcome Autumn roadshow program 6 meetings North Island 6 meetings South Island Just Mark and Ross Spring Roadshows In-market presenters (like last year) more meetings/varied locations April 2014

3 Mark Shadbolt Chairman Wools of New Zealand

4 Grower Roadshow Agenda Welcome Introduction Chairmans comments Ross Townshend, CEO Questions/Comments Informal discussion/drinks April 2014 Mark Shadbolt, Chairman, Wools of New Zealand

5 Communicating Were doing our best to communicate with you Several new initiatives in Rosss presentation Encouraged with growing uptake of D2S and contracts. Were finding that quite a few shareholders still dont know that we are operating and that we can take all of their wool We would like you to work on WNZs behalf to connect with your friends and neighbours. Mark Shadbolt, Chairman, Wools of New Zealand April 2014

6 A year old We got started 25 th February 2013 Capitalisation Prospectus – Sets the Direction for five years 720 shareholders$6.05 million capital $10 m WMDC (5 years)14.5 million kg Additional supporters (~300)~5 million kg Mark Shadbolt, Chairman, Wools of New Zealand April 2014

7 Vision: To be the leading innovative sales and marketing company for New Zealand strong wool Objectives Protect and build the value of the Wools of New Zealand Brands Done Provide the opportunity for all Strong Wool Growers Done Provide transparent feedback to Shareholders rewarding them for delivering fit-for-purpose product to our customers Step one 2013 …. Develop the market-pull strategy by increasing branded contracts and relationships with the supply chain Step two 2013/14 …. Evolving within five years to be a fully commercial Grower-owned sales and marketing business Step three …. Mission: To progressively improve the profitability of our Grower Shareholders Mark Shadbolt, Chairman, Wools of New Zealand April 2014

8 Key Achievements Prospectus Development – Repaid Loans WNZ Brands / WNZ Ltd merger – protection End of Year result – Cash result 40% of Prospectus forecast loss On target for cash neutral position 2013/14 CEO appointed Strategic Plan refined Financial Management Appointment of CFO Mark Shadbolt, Chairman, Wools of New Zealand April 2014

9 Key Achievements contd WMDC/WMDF: – transacting growers wool - Thank you In-market activity: US, China, Europe – build on whats started Direct to market stable price contract Camira Lambs wool contract – volume increase Relationships: Collaboration – scours Future shareholding: Willing buyer, willing seller Communications – e bulletins, roadshows, media Mark Shadbolt, Chairman, Wools of New Zealand April 2014

10 Financial Performance YE YE Prospectus($1107k)$435k Actual($396k) Forecastbreak-even (later start from later capitalisation impact on both years) Mark Shadbolt, Chairman, Wools of New Zealand April 2014

11 Now operating selling your wool Direct to Scour Contracts – Camira, Grentex, Laneve, more coming Foreign exchange cover deal by deal Good credit insurance Well supported by ANZ bank with Trade Finance facilities and FX advice We are picking and choosing the best opportunities We are being very careful and risk averse Mark Shadbolt, Chairman, Wools of New Zealand April 2014

12 Industry Co-operation WNZs position is to co-operate with the wider wool industry We have had excellent support from: Wool Service International (WSI) Elders Primary Wool (EPW & PWC) New Zealand Merino (NZM) We will continue to build positive relationships Mark Shadbolt, Chairman, Wools of New Zealand April 2014

13 But… We have been disappointed at some mis-information campaigns about WNZ, its future and its viability. This has happened in New Zealand at farm gate level And It has happened in the International marketplace. We have sought assurances that it will stop! Farmers need to be fully involved in the supply chain. Mark Shadbolt, Chairman, Wools of New Zealand April 2014

14 Trading WNZ Shares Only a few sales so far, usually farm sales and family reorganisation. We have engaged CooperAitken to act as a share buying and selling facilitator There are shares for sale You can access the share sale process at Mark Shadbolt, Chairman, Wools of New Zealand April 2014

15 Price Volatility Mark Shadbolt, Chairman, Wools of New Zealand April 2014 Coarse Xbred Price Indicator (NZ$)

16 Price Volatility Mark Shadbolt, Chairman, Wools of New Zealand April 2014

17 Market Pull Strategy April 2014 Mark Shadbolt, Chairman, Wools of New Zealand

18 Ross Townshend Chief Executive Wools of New Zealand

19 The Problem? 60 years ago, 85% of a sheep farmers revenue was from wool and 15% from meat Now the complete inverse is true We want to bring up wool returns to >30% in a 5 year timeframe Weve lost some wool growing skills, wool harvesting skills and wool genetics = Loss of confidence Weve lost stock numbers – and theyre not coming back Ross Townshend, Chief Executive, Wools of New Zealand April 2014

20 Comparative Returns A dairy farmer gets ~80% of the wholesale returns for their product A red-meat farmer gets ~50% of wholesale returns A wool grower gets ~20% of wholesale returns Yet Dairy is the most capital/energy/environment intense Wool is the least capital/energy/environment intense But wool has the most convoluted value chain Ross Townshend, Chief Executive, Wools of New Zealand April 2014

21 Market Price Variability Whole milk powder sells for USD5000/MT and is rarely offered outside a $50/MT band = 1% Manufacturing beef rarely sells outside a band of +/- 2USc/lb = 1% on USD2.00/lb Wool is often offered by a range of NZ exporters in a +/-15% range Ross Townshend, Chief Executive, Wools of New Zealand April 2014

22 The Problem? The Wool industry destroys value at the sales end with multiple offerings of undifferentiated wools in a race to the bottom Example: 7 bids, UK customer, basic slipe wool GBP3.40 to 2.90/kg 50p difference = $1/kg re-sets buyers price expectation (lower) mid point price effect NZ$6M on 12M kg Ross Townshend, Chief Executive, Wools of New Zealand April 2014

23 Route to Market Dairy: Well established customer base + GDT, now with ~1000 bidders - Leads to Price Discovery Beef/Lamb:Established disciplined commodity markets, integrated procurement, slaughter, by-products and sales Some good established consumer positions Wool:Auction system that allows (a very small group of) traders to take a position with no thought for the true market price Ross Townshend, Chief Executive, Wools of New Zealand April 2014

24 Differentiation Dairy: NZ global reputation for quality, technology and reliable supply Meat: NZ Lamb well established and differentiated some success at grass-fed appellation plenty of lean (bull) grinding beef Wool:Only 3 brands of significance - Wools of New Zealand [Fern brand] - Laneve [fully traceable - WNZ owned] - Just Shorn [Elders Primary Wool] Rest is white and fluffy commodity notable step down in wool quality Ross Townshend, Chief Executive, Wools of New Zealand April 2014

25 We are developing New Ways Direct to Scour (D2S) ContractsCamira Grentex Laneve More to come in 2014 Other new options Strong Bright and White Key Tradeshow learning Applicable for hand-tufting in China Ross Townshend, Chief Executive, Wools of New Zealand April 2014

26 WNZ Route to Market WNZ has brands, in-market presence and ~100 Premier Partners unique WNZ co-brands with many big name carpet and textiles makers in UK, Europe and USA unique Partners network include spinners, dyers, weavers, carpet makers right through to wholesalers and retailers unique WNZ brands are not well known at home in NZ, but very well respected unique - Laneve is the only traceable wool brand globally -huge uptake in UK, some in Europe, just launched in USA in Jan generates real value - price discovery Ross Townshend, Chief Executive, Wools of New Zealand April 2014

27 WNZ Points of Difference * indicates Unique to WNZ Traceability* Product development* Style* Colour * Design* Sampling* Technical support* Sales strategies* Market support programmes* Wool Supply April 2014

28 GROWERS SCOUR EXPORT SPINNER MANUFCTURER WHOLESALE RETAIL CONSUMERS DYER DIRECT INTEGRITY AND TRACEABILITY NZWSI GRENTEX SYD WHITEOAK WNZ PREMIER PARTNERS TRANSPARENT FEEDBACK LOOP WNZ Market Pull Strategy Ross Townshend, Chief Executive, Wools of New Zealand

29 Camira Lambswool Contract Camira Fabrics is a Huddersfield MBO textiles business of competence, focussed on transport and office fabrics Vertically integrated with spinning, dying, knitting, weaving, piece-work etc. Blazer is an office fabric that is a runaway success - Co-branded as Laneve - traceable, pesticide free, low VM, EU Eco-label kg for 2014, ~500000kg for partnership that we expect to rollover in July 2014 for 2015 supply on SPM terms - Exploring other opportunities with Camira Ross Townshend, Chief Executive, Wools of New Zealand April 2014

30 Value in Camira Contracts Current spot LW price: $5.10/kg clean Camira contract price: $6.25/kg for 0.0% VM $6.10/kg for 0.1% VM (limited) $6.00/kg for 0.2% VM (some) D2S logistic model saves >13c/kg Total price advantage ~$1.30/kg But Deferred payment terms: 20% 60 days, 60% 30 Nov, 20%, 28 Feb Matches Camira demand with NZ farm supply ( = 16 mths) Ross Townshend, Chief Executive, Wools of New Zealand April 2014

31 Why Deferred Terms? Most wool harvested January 2014 to April 2014 Supply from April 2014 to March 2015 Camira pays on 30 th Month following delivery ( Last ) 400,000kg $6.25/kg = $2.5M (+costs ~$600k) Trade off: better market returns = slower/later payments Full market transparency Good but new relationship with ANZ Bank Ross Townshend, Chief Executive, Wools of New Zealand April 2014

32 Grentex Carpet Contract Mumbai based, family owned, wool spinner WNZ Premier Partner, supplying Laneve yarn to: Southern Yarn Dyers (Atlanta, GA – WNZ Premium Partner) who dye yarn for: White Oak Carpet (Wichita, KS – WNZ Premium Partner) who make the USA launch Laneve carpet First step in a multi-step value chain – glued together by Laneve brand Grower uptake low Colour spec (y-z = 0) too tight for many growers Colour flexibility from Grentex from visit in March Ross Townshend, Chief Executive, Wools of New Zealand April 2014

33 Laneve Carpet Contract Similar to Grentex contract Direct result of Trade Show presence trial Laneve supply Canada Romania Italy Belgium (tbc) Turkey (tbc) Less tight colour spec (y-z <2.5) $4.85/kg (clean) Uptake so far = modest. Ross Townshend, Chief Executive, Wools of New Zealand April 2014

34 Direct to Scour Partnership with Wool Services International – learning curve Uses Wool Logistics as a freight broker – some issues Conventional broker model costs 26c to 30c/kg D2S all inclusive cost 13c/kg Net saving >13c/kg – not huge but worth having : $2730 for average supplier (21,000kg) Almost equates WMDC deduction, 26% return on initial capital Top End wool collected for WNZ contracts All other wool priced by WSI against objective tests Growers decision to accept the WSI price Payment in 7-10 days Doubled every month since October (290T in Feb 14) Ross Townshend, Chief Executive, Wools of New Zealand April 2014

35 D2S Volumes Ross Townshend, Chief Executive, Wools of New Zealand April 2014 est

36 Everyone Hates Volatility Ross Townshend, Chief Executive, Wools of New Zealand April 2014

37 WNZ Approach to Longer Term Pricing Everyone in the wool value chain seeks less price volatility Price upside volatility risks swap to synthetics – never comes back Most people are prepared to trade some price for less volatility WNZ seeks to build enduring roll-over type relationships Development of the Stable Pricing Mechanism (SPM) Our customers like this and we have it running off-shore WNZ seeks to build back-to-back supply on the SPM – by contract Ross Townshend, Chief Executive, Wools of New Zealand April 2014

38 Stable Price Mechanism Operating for 2½ years, 4 periods with 5 th committed Being rolled out for Camira 2015 supply contract Nice and simple Relies only on 2 independent indices CCWI and PPI Allows two way equal gain-share Widely road-tested with customers – acclaim Now seeking Growers support at April Roadshows Ross Townshend, Chief Executive, Wools of New Zealand April 2014

39 Dead Band + 5% Base Price CCWI Market movement +ve 50% gain share +ve CCWI Market movement -ve 50% gain share -ve Ross Townshend, Chief Executive, Wools of New Zealand April 2014

40 Price increase during Year 1 50% +ve gain share sets base price for Year 2 (+ PPI) Price decreases during Year 2 50% -ve gain share sets base price for Year 3 (+ PPI) Year 1 Year 2 Year 3 Ross Townshend, Chief Executive, Wools of New Zealand April 2014

41 + 5% Base Price Major movement dead band 50% gain share +ve Major movement dead band 50% gain share -ve 1.A major movement dead band also needs to be created/agreed. 2.At the upper end, WNZ needs to be able to renegotiate to be certain that it can source wool for the customer. 3.At the lower end, the customer needs to be insulated from paying an excessive price relative to open market. 4.The MMDB is set at two levels a)+/- 20% when the impacted party is entitled to initiate discussion (Yellow card) b)+/- 25% when the SPM is suspended (Red card) Ross Townshend, Chief Executive, Wools of New Zealand April 2014

42 Communication Our Achilles Heel Fortnightly E-bulletin Only ~40% of E-bulletins are opened Many addresses change – update please Some carriers drop off attachments Mail out to non-E mail people Feedback on communications would be good Opening would be great Reading would be better still Acting on contracts and options would be superb Ross Townshend, Chief Executive, Wools of New Zealand April 2014

43 WNZ Approach to Grower Relations Roadshows – Autumn and Spring E Bulletins – low penetration New appointments Supplier Relations Manager (0.5FTE) 3 Supplier Liaison Officers (0.3FTE) Grower Advisory Panel (GAP) 15 to 20 noted growers test panel for new ideas Open and accessible Board and Executive Ross Townshend, Chief Executive, Wools of New Zealand April 2014

44 Trial with Hazlett Rural Canterbury roll-out trial with new generation farm support company Clip on to other farm services Potential roll-out in other areas Dont want our own field force (duplication and cost) Ross Townshend, Chief Executive, Wools of New Zealand April 2014

45 Questions? Ross Townshend, Chief Executive, Wools of New Zealand April 2014

46 14th March 2014 Ross Townshend, Chief Executive, Wools of New Zealand


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